India, Middle East can step in to reshape global trade amid Trump tariff war, expert says

Arabian Business

17-04-2025

As US President Donald Trump's tariffs trigger a projected 0.2 per cent contraction in global merchandise trade, the strategic economic partnership between India and the Middle East offers an alternative model for trade resilience and growth, according to regional economic experts.
'As talk of tariffs and trade wars rocks stock markets around the world, the strengthening of connections between India and the Middle East stands out as a rare beacon of opportunity for growth-focused investors,' Andrew Stevens, Principal Representative – MENA at EquitiesFirst, a specialist global equity-backed financing provider, told Arabian Business in an exclusive interview.
'Already Dubai's airports are packed with Indian travellers, while UAE sovereign wealth funds are pouring billions into Indian companies and infrastructure projects, and Indian firms like Lulu Group are making waves in the UAE's capital markets,' he said.
'Now, with the India-Middle East-Europe Economic Corridor (IMEC) taking shape, this partnership could reshape global trade.'
Strengthening India-UAE economic eies
Stevens said the UAE's position as a global financial hub can complement India's growing capital markets, enabling more Indian firms to list in the UAE and vice versa. Strengthening startup and SME collaboration through joint venture funds and incubators would also diversify India-UAE investment avenues beyond traditional sectors like real estate and energy, he said.
'To further enhance bilateral investments between India and the UAE, policymakers should focus on deepening economic integration through strategic initiatives,' he said.
The MENA top executive of EquitiesFirst, which services founders, entrepreneurs, CEOs, board members and other high-net-worth individuals (HNWIs) globally, said while the UAE-India Comprehensive Economic Partnership Agreement (CEPA) laid a strong foundation by reducing tariffs and increasing trade flows, expanding this framework to include services, digital trade, and investment protection agreements would further strengthen economic ties between the two regions.
'Both nations should also explore joint infrastructure projects, particularly in logistics and energy, to support the India-Middle East-Europe Economic Corridor (IMEC). Additionally, streamlining regulatory approvals for cross-border investments, especially in sectors like real estate, fintech, and renewable energy, would encourage more capital flows,' Stevens said.
He added that the UAE's sovereign wealth funds (SWFs) have shown strong interest in India's consumer and infrastructure sectors, so targeted incentives for long-term investments – such as tax breaks or fast-tracked approvals – could accelerate funding.
He said capital and investments are already flowing between the two nations, citing the examples of Abu Dhabi Investment Authority's (ADIA) $500 million investment in India-based eyewear retailer Lenskart in 2023, and its move to set up a $4 billion fund to invest further in the following year.
'Several sovereign wealth funds from the Middle East have invested in highways and other infrastructure. In the opposite direction, Indian entrepreneurs are building on their successes in the UAE and benefiting from the expansion of the Emirates' capital markets,' Stevens said, citing the $1.72 billion IPO of Lulu Retail in 2024 as a recent example.
Stevens also pointed out that Indian investors are the largest foreign owners of real estate in the UAE, with investments valued at around $30 billion.
Still, despite this strong momentum, Stevens cautioned that hurdles remain.
'Regulatory complexities in India, including bureaucratic delays in approvals and land acquisitions, remain a challenge. India's taxation policies and retrospective regulatory changes sometimes create uncertainty for foreign investors,' Stevens said.
He also cited the issue of currency volatility – such as the rupee's depreciation – as another challenge which poses risks for long-term investments, discouraging some UAE-based funds from increasing exposure.
'Another issue is limited diversification in investment sectors. Most UAE investments in India are concentrated in real estate, infrastructure, and energy, while opportunities in manufacturing, technology, and healthcare remain underleveraged. Conversely, Indian investments in the UAE are heavily skewed toward real estate, with fewer ventures in high-value sectors like finance and logistics,' Stevens said.
Beyond trade barriers
As global trade faces mounting pressures, experts say the UAE's broader strategy of 'strategic interdependence' may offer a model for insulating economies from tariff shocks.
'It's not about strategic autonomy anymore. It's about creating strategic interdependence, because that's the only way with which we can collectively survive in a world where multilateral action is receding,' Dr Khalifa Al Suwaidi, Research Fellow at Abu Dhabi's Anwar Gargash Diplomatic Academy, told Arabian Business in a recent interview.
The UAE's approach to international trade agreements demonstrates a significant shift from traditional tariff reduction to embedding deeper, multi-sector cooperation.
'The UAE embeds its relations with countries through CEPAs in a way that helps these relationships outlive incumbents, whether they are democratically elected or otherwise,' Al Suwaidi explained.
'It's still leader-to-leader diplomacy, which the UAE has been adept at for quite some time, but it's now morphing into something enshrined in formal agreements that extend across multiple spheres and sectors.'
This strategy is increasingly relevant as Trump's tariffs target major economies, including China, the EU, Canada, Mexico, Japan, and South Korea—leaving US businesses expected to pay between $1 billion to $2 billion per day in tariff costs, according to CNBC. So far, Gulf Cooperation Council (GCC) countries have largely been exempt.
For countries bracing against the effects of global trade shocks, the UAE's diversification plan is being watched closely.
'The UAE's CEPA strategy has been designed to develop a diversified trade portfolio and become a trade hub,' said Mahdi Ghuloom, Junior Fellow in Geopolitics at the Observer Research Foundation Middle East. 'While Trump's tariffs are a separate issue, the UAE's CEPA push reflects foresight and an effort to insulate itself from global trade volatility.'
This aligns with the country's goal of reaching AED4 trillion (approximately $1.09 trillion) in trade by 2031.
'The scale of diversification reduces reliance on any one bloc of markets,' Ghuloom added, noting that when CEPAs proliferate, they help mitigate negative shocks from specific trading partners.
'The UAE's CEPAs include provisions on investment, competition, and public procurement. This signals regulatory maturity and strengthens the UAE's credibility as a destination for long-term investment,' he explained.
As countries worldwide respond to US tariffs with retaliatory measures – such as Canada imposing 25 per cent tariffs on US goods and China introducing new tariffs on critical minerals – the India-Middle East corridor presents a rising alternative to traditional trade routes.
Stevens added that the potential for trade growth between the UAE and India, the need to diversify the economic base of Middle Eastern economies and India's focus on labour-intensive growth will create a range of opportunities for investors looking to profit from the next chapter of globalisation.
'Flexible, non-recourse financing can be a compelling funding solution for long-term shareholders with an eye on this tremendous potential,' Stevens said.