The Luxembourg market - stability in stormy times?

National and international trade currently seems to be sliding from one crisis to the next. The Covid pandemic had barely been overcome – and its effects were still in full swing – when the Russian invasion of Ukraine was joined by the energy crisis. The climate crisis is still lurking in the background, often somewhat forgotten.

However, the international market economy, with the USA at its head as the patron of free trade, was always turning in the background, sometimes better, sometimes worse. This was to change barely two months ago, on 20 January 2025, when Donald Trump took office for the second time. Hardly a day has gone by since then without new, seemingly arbitrary punitive tariffs being announced, paused, withdrawn or implemented, especially against allies. 

Alongside Canada, Mexico and Australia, among others, the EU has now also fallen foul of the US President, who has imposed a 25 per cent tariff on EU steel and aluminium products because they were "created for no other reason than to harm the US". The EU must prepare for a world in which the US no longer holds its hand over it and build a defence industry that makes this possible – and quickly.

As old alliances crumble and existing free trade agreements are torn up in the air, Luxembourg companies must also find their feet in a new world. Carlo Thelen, Director General of the Luxembourg Chamber of Commerce, is trying to find order in the chaos – and is breaking several spears in favour of a free market that is increasingly being put to the test.

Lëtzebuerger Journal: If you look towards the USA at the moment, you might feel a little dizzy. Seemingly unfounded punitive tariffs against allies – Canada, Mexico, the EU or now, out of nowhere, Australia – are announced only to be withdrawn on the same day and then implemented… Is the USA still a rational player at all?

Carlo Thelen: The USA itself is, but with the Trump administration we are seeing a profound break: there is enormous volatility, structures are missing and predictability is almost non-existent. They say he is a dealmaker, but so far he has negotiated very erratically and irrationally, sometimes to the detriment of the Americans. This makes dealing with this administration much more complicated. Despite everything, we should continue to regard the USA as an important partner.

The international market is understandably sensitive to this uncertainty. What adjustments are you seeing in Luxembourg, particularly in the steel sector, which has been subject to a 25 per cent import tax since last week?

The companies, especially players such as ArcelorMittal, are intensively analysing the situation. The EU is also already reacting with additional customs measures – a scenario that we already experienced in the first Trump era and also in the context of China. For us as a chamber of commerce and economists, free trade is key. As a small, open economy, it is a matter of course for Luxembourg to sell our products worldwide – and the US market plays an important role in this. Although companies have not yet made the fundamental switch, they are already evaluating which measures are necessary in the next steps. It is clear that steel and aluminium – products that are also manufactured in America – are particularly affected by these measures. If import duties are imposed on products to support domestic production, the Americans themselves risk higher production costs and ultimately higher inflation, among other things. 

At the same time, we are observing a trend towards the "buy local" principle, which – in connection with the "Made in Luxembourg" label – also reflects the desire for regional, sustainably produced goods. Unfortunately, not all products that our residents consume can be produced more profitably here. Therefore, free international trade remains of vital importance for Luxembourg.