Malta reacts as looming US-EU trade war threatens economic stability

A potential transatlantic trade war is brewing after US President Donald Trump reaffirmed his intention to impose tariffs on European Union goods.

On Friday, Mr Trump stated unequivocally, “Am I going to impose tariffs on the European Union? Do you want the truthful answer or should I give you a political answer? Absolutely, absolutely.”

His remarks have sparked concerns across Europe, with many fearing that heightened trade tensions could disrupt global supply chains and raise costs for businesses and consumers alike.

Mr Trump’s previous administration imposed tariffs of 25 per cent on steel imports and 10 per cent on aluminium imports from the EU, which led to retaliatory measures from the bloc, affecting key American exports such as whiskey, motorcycles, and denim. With the US remaining the EU’s second-largest trading partner, accounting for nearly 20 per cent of its total exports in 2023, the implications of renewed trade barriers are profound.

Opposition MP Beppe Fenech Adami warns of economic fallout

Partit Nazzjonalista MP Beppe Fenech Adami has voiced strong concerns over the impact that new US tariffs could have on Malta’s economy.

“As a party, we are deeply concerned about the potential impact of tariffs on the European Union, as they will inevitably affect trade relations,” he tells BusinessNow.mt.

Highlighting the specific ramifications for Malta, he noted that “Malta has established trade regulations with the United States, and the imposition of tariffs would undoubtedly strain our economic relationship with the US as a trade partner.”

He also pointed out that Maltese businesses engaged in trade with the US could face significant repercussions, particularly SMEs. “Small and medium-sized enterprises (SMEs) with US ties could also see a rise in operational costs, making it more challenging for them to remain competitive,” he explained.

Dr Fenech Adami further stressed the risk of inflation, stating that tariffs would “drive up the cost of various essential goods and utilities.” He also warned that industries reliant on exports to the US could experience job losses, while supply chain disruptions may impact everyday necessities.

While acknowledging that the Government shares these concerns, he cautioned against an escalation in trade tensions, stating, “we share the Government’s concerns and stand behind the EU’s position – firm and united, yet cautious to avoid escalating into a trade war.”

He emphasised the need for careful navigation of the situation, asserting, “while we support a strong European response, we believe it is crucial to navigate this situation carefully to protect our economic interests.”

Ministry for Foreign Affairs emphasises need for stability

The Ministry for Foreign Affairs echoed these concerns, emphasising the importance of preserving Malta’s trade relationship with the US within the broader EU framework. “Malta is closely following the ongoing developments, as the EU-US trade and investment relationship is the biggest in the world. It is determined to preserve this relationship with this key player as both sides have a mutual interest in stronger transatlantic cooperation.”

The Ministry stated that Malta “will remain vigilant regarding any new trade measures, including tariffs, and will continue to take all necessary measures to bolster the Maltese economy’s resilience to such developments.”

Emphasising the need for collaboration, the Ministry underscored that “the Government is committed to ensuring that the EU and the US remain open to each other’s trade and investment, maintaining existing openness for both imports and exports in goods and services. This requires an effort from both sides. Transatlantic growth and economic stability should remain a shared objective, within a climate characterised by foreseeability, and not uncertainty, for businesses on both sides of the Atlantic.”

Malta’s position is clear: “Malta is a firm believer in open markets and respect for international trade rules. This is even more crucial for small-island state economies such as ours to continue thriving.”

The Ministry also aligned itself with EU President Ursula von der Leyen’s stance on negotiations, stating that Malta “shares the position expressed by EU President Ursula von der Leyen on Tuesday, affirming the EU’s readiness for tough negotiations to find solutions that can work out any grievances and set the foundations for a stronger partnership.”

What’s at stake for Malta?

Malta exported €126.5 million worth of goods to the US in 2023, while importing €254.9 million worth of goods from there in the same year. Any imposition of tariffs could impact this trade balance, particularly for industries dependent on exports to the American market.

Economists at Goldman Sachs and JPMorgan have already warned that the risk of tariffs – combined with potential European retaliation – could significantly weigh on the eurozone’s economic outlook.