Trump tariffs bolstering ties between Gulf and Asian nations

Arab News

20-04-2025

https://arab.news/5mqex
In recent weeks, much media attention has focused on US President Donald Trump's tariffs. However, one of the implications of the American duties that has not yet been explored extensively is how, by disrupting trade flows, they might encourage and intensify political and economic ties between the Gulf Cooperation Council member states and other countries in Asia.
These nations, like other powers around the world, are seeking renewed partnerships to bolster their political and economic futures amid growing US protectionism. Vietnam and the UAE recently upgraded their diplomatic ties, while Malaysia and Indonesia are strengthening their relationships with Saudi Arabia.
Take, for example, the injection of $100 million into Malaysia's AirAsia by the Saudi Public Investment Fund. Indonesia has also been in talks with the Kingdom to boost trade.
The growing economic connections between Asia and the Gulf were highlighted in an eye-catching report by the Asia House think tank. What it termed the Middle Eastern 'pivot' to Asia is evidenced by the fact that the value of two-way trade reached a record level of $512 billion in 2022.
As highlighted by the report, this remarkable phenomenon has been driven by major bilateral relationships. One of the key findings was that Gulf-China trade growth will continue to outstrip that of the region's trade with the West. Assuming that both trade relationships continue to expand at 2010-2023 rates, trade with China will overtake trade with the West in 2027.
Certainly, there are some risks, including oil price volatility, political instability in the Middle East and US-China tensions, all of which could affect global economic flows. However, the pivot by Gulf nations to Asia continues, now additionally fueled by Trump's trade tariffs.
This Middle Eastern pivot to Asia will continue, driven in large part by hydrocarbons, which still account for about half of trade between the Gulf and Asia. In 2023, about half of Asia's oil imports originated from the Gulf region and wider Middle East and such trade will probably continue to rise through to 2030 as energy consumption in China, India and Association of Southeast Asian Nations member states further expands.
However, there are also key areas of cooperation outside of energy, including artificial intelligence, advanced technologies, construction and infrastructure.
One of the other highlights of the Asia House report was the ways in which two-way trade between ASEAN and GCC nations has grown, reaching a high of $134 billion in 2022. One of the key components of this region-to-region trade is the relationship between the UAE and Indonesia, which was boosted in 2022 by a bilateral agreement in nuclear energy, investment and financial services.
In recent years, GCC-ASEAN relations have also been enhanced by a new summit initiative that began in October 2023 in Riyadh. The first was co-hosted by Indonesian President Joko Widodo and Saudi Arabia's Crown Prince Mohammed bin Salman. The next will take place in Malaysia in May, hosted by Prime Minister Anwar Ibrahim, who has called for the two regions to begin negotiations for a formal trade agreement.
This is one of the defining geopolitical and economic shifts of our multipolar age, with potential ramifications worldwide.
Andrew Hammond
Key recent economic deals between the regions include the UAE awarding, in September 2024, Malaysia's Petronas an oil and gas exploration concession covering more than 7,000 sq. km in Abu Dhabi's Al-Dhafra region. In July 2024, Dubai International Financial Centre and Indonesia's Nusantara Capital City Authority signed a memorandum of understanding for the development of Indonesia's Nusantara Financial Center.
Moreover, Indonesia's state-owned electricity company, Perusahaan Listrik Negara, in August 2024 signed a power purchase agreement with Saudi Arabia's ACWA Power to develop the Saguling Floating Solar Project in West Java province. The agreement built on an announcement last year that ACWA Power would work with Perusahaan Listrik Negara and chemicals company Pupuk Indonesia on a green hydrogen project, scheduled to begin in 2026.
It is, in part, this Middle Eastern pivot to Asia that is driving renewed European interest in GCC economies. Last December alone, both French President Emmanuel Macron and UK Prime Minister Keir Starmer visited the region.
Whereas Macron visited only Saudi Arabia, Starmer traveled to both the UAE, meeting President Sheikh Mohammed bin Zayed, and Saudi Arabia, where he held talks with the crown prince, highlighting what he called the region's 'untapped economic potential.' His trip followed a state visit to the UK in December by Qatari Emir Tamim bin Hamad Al-Thani, who agreed to a new long-term green energy partnership worth more than $1 billion.
The UAE and Saudi Arabia are both major investors in the UK. Britain's two-way trade with the UAE is worth about $30 billion a year, while trade with Saudi Arabia is worth more than £20 billion ($26.5 billion). More than 7,000 UK businesses export goods and services to Saudi Arabia, supporting almost 90,000 jobs across the country, and 14,000 businesses sent goods to the UAE in 2023.
During his trip, Starmer sought not only to boost bilateral economic ties with these two key GCC members, but also to push for a broader UK-Gulf deal. Forecasts suggest such an agreement with the region could increase bilateral trade by about 16 percent, potentially adding more than $10 billion a year to two-way trade in the longer term.
One of the big prizes for the UK of a GCC deal could be additional open access to investment from Gulf sovereign wealth funds. These tend to be cross-sector investors who often take a multidecade economic view that would enable the rebuilding of the UK's aging infrastructure and assist its energy transition.
It is therefore likely that the growing global focus on Gulf countries, not only by Asian but also European nations, is likely to grow. This is one of the defining geopolitical and economic shifts of our multipolar age, with potential ramifications worldwide.