Issue link: https://maltatoday.uberflip.com/i/1533342
11 NEWS maltatoday | SUNDAY • 16 MARCH 2025 second term unleashes global uncertainty and Gaza and threats between China and Taiwan. "We are al- ready seeing certain companies deciding to shut down their operations, which in turn will impact the supply chain, leav- ing companies scrambling to find alternatives to ensure that their operations would be able to continue, albeit at potential- ly higher operational costs," he added. Bracing for impact Cuschieri said many business- es have been on high alert for several years, potentially even before the COVID-19 pan- demic. This forced companies to nearshore their operations (outsourcing work to a nearby country) or even re-shore to solve vulnerabilities. "It is a general concern that EU companies, especially in the manufacturing sector, will not be able to react in a faster man- ner than they have been doing in the last few years," he said. Cuschieri added that, in the short term, tariffs are bound to have a direct impact on the cost of imported goods. "For a country like Malta, which is heavily reliant on imports, this is expected to have a significant impact on the cost of living," he said. He also mentioned the Malta Chamber's position that wage adjustments need to be linked to productivity, as opposed to just the cost of living or other social measures funded by em- ployers. Failing to do this could have dire consequences on the competitiveness of business, especially export-oriented businesses, Cuschieri said. Meanwhile, Xuereb said Mal- ta will only be able to mitigate the effects for so long. "We can superficially shield our- selves from the direct impact of higher spending on defence by waving the neutrality flag, just like we did when we fully subsidised energy costs. But we still must deal with the indirect effects of imported inflation, different funding priorities for the EU, the impact on consum- er confidence in Europe, and more pronounced exchange rate risks when dealing in other currencies." The European picture As the US shows itself to be an unreliable partner, the EU is starting to think about self-re- liance. Xuereb pointed out that this situation is not new, cit- ing how Europe once relied on cheap gas from Russia before the Ukraine war and depend- ed on the US for defence up until now. With Trump un- likely to offer future support on defence, the EU will have to become more self-reliant and increase its defence spending – and that money will need to come from somewhere. "A minority of businesses can benefit from increased spending on various forms of defence. The rest are more likely to be adversely affected by more public debt, higher taxes, or less spending on other things, such as infrastructure. But just like European busi- nesses had to deal with high- er energy costs and accelerate their transition to renewables, they will have to deal with this, too. There are no options for Europe other than to get its act together," she said. Cuschieri said the EU needs to react faster to the business world by reducing bureaucracy and over-regulation, which he said have been burdening busi- nesses for years. "In times of heightened uncertainties, this is key to reducing the burden on EU-based companies when compared to their global coun- terparts. The Malta Chamber has constantly and consistently been insisting, at both local and EU levels, that this is key to the survival of EU-based com- panies." For Xuereb, what's impor- tant for European businesses is to keep their eye on the prize and not lose sight of long-term objectives. "The EU is curtail- ing corporate sustainability reporting, and that is a good thing because more bureaucra- cy will only increase unproduc- tive costs and reduce European competitiveness. But the focus on developing and investing in more sustainable technologies must remain," she said. Xuereb stressed that consol- idating businesses is essential for making large-scale digital investments viable, which is crucial for addressing current demographic and competitive- ness challenges. She also in- sisted on accessible financing to support technological ad- vancements and the continu- ous upskilling of the workforce to maximise the benefits of emerging technologies. "And while the US has substantial leverage, Trump's bullying tactics are earning him a lot of enemies that could shift their reliance away from the US to each other instead," she said. Businesses will scramble to mitigate the effects of these tariffs, but Cuschieri reminded that, between the lack of clar- ity on the US administration's ultimate policy objectives and the potential retaliatory ac- tions by the countries affect- ed, we could be staring down the barrel of a global recession, with a contraction of histor- ic proportions. "Addressing this situation urgently and in a cool-headed manner is a must!" Marisa Xuereb and Ruben Cuschieri