Gulf nations largely sheltered from Trump's tariff storm, experts say

Arabian Business

04-04-2025

While US President Donald Trump's sweeping new tariffs have sent shockwaves through global markets and prompted retaliatory threats from major economies, Gulf Cooperation Council (GCC) nations, including the United Arab Emirates, appear likely to escape the worst direct impacts, analysts said on Thursday.
The tariffs, which impose a baseline 10 per cent duty on all imports to the United States and higher 'reciprocal' rates of up to 54 per cent on countries with significant trade surpluses with the US, have largely spared Middle Eastern nations from the higher tier of charges.
'The GCC region, particularly the UAE, is likely to remain relatively insulated from these tariffs,' said Vijay Valecha, Chief Investment Officer at Century Financial.
'In 2024, the US enjoyed a substantial trade surplus with the UAE, exporting $27 billion while only importing $7.5 billion,' Valecha added.
This favourable trade balance for the United States means Gulf nations avoided being classified among what the White House described as the 'worst offenders' that received higher reciprocal tariffs.
The tariffs, expected to generate around $700 billion in revenue annually, according to Century Financial's estimates, primarily target countries where the US has large trade deficits, such as China, the European Union, and others.
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However, experts caution that the region could still face significant indirect consequences from global economic disruption.
'The imposition of tariffs has the potential to significantly impact the UAE and GCC countries, even if they're not directly targeted,' said Hamza Dweik, Head of Trading and Pricing for the Middle East and North Africa at Saxo Bank.
Oil-dependent economies in the region remain particularly vulnerable to secondary effects, according to Dweik.
'Given their reliance on oil exports, any global economic slowdown triggered by these tariffs could lead to a drop in oil prices, straining their economies,' he said.
Currency arrangements in the region could also amplify negative impacts.
'The UAE's currency peg to the US dollar means that fluctuations in dollar value can directly influence purchasing power and inflation rates, particularly if imported goods become more expensive,' Dweik added.
Several key sectors could face pressures even without direct tariff impacts, with electronics, automobiles, and construction potentially seeing rising costs that could affect consumer spending and push inflation upward, according to Saxo Bank's analysis.
While Gulf nations may avoid the direct impact of higher reciprocal tariffs for now, their economies remain connected to global trade flows and commodity markets that could see significant disruption if trade tensions continue to escalate.
Global reactions to Trump's new tariffs
President Donald Trump announced sweeping new tariffs on April 2, 2025, in what he called a 'declaration of economic independence' from the White House Rose Garden.
The measures include a baseline 10 per cent tariff on all imports starting April 5, with higher 'reciprocal' tariffs of up to 54 per cent on about 60 countries starting April 9.
Trump also ended the 'de minimis' loophole that allowed goods worth under $800 to be imported duty-free, effective May 2. A separate 25 per cent tariff on imported automobiles took effect at midnight on April 3.
China will face the steepest burden with a 34 per cent tariff on top of an existing 20 per cent, totaling 54 per cent. The European Union faces a 20 per cent rate, while Japan (24 per cent), India (26 per cent), Vietnam (46 per cent), Taiwan (32 per cent) and South Korea (25 per cent) are also hit with substantial duties.
The United Kingdom received only the baseline 10 per cent, while Canada and Mexico were exempt from new tariffs but remain subject to previous 25 per cent tariffs on non-compliant goods.
The global reaction has been swift and largely negative. China's Commerce Ministry vowed 'resolute countermeasures' to protect its interests, while European Commission President Ursula von der Leyen called the tariffs 'a major blow to the world economy' with 'dire consequences.'
International organisations have also expressed concern. WTO Director-General Ngozi Okonjo-Iweala warned of a potential 1 per cent contraction in global trade volumes in 2025, while IMF Managing Director Kristalina Georgieva stated the tariffs 'clearly represent a significant risk to the global outlook at a time of sluggish growth.'
Japan's Prime Minister Shigeru Ishiba questioned why Japan faces tariffs despite being 'a country that is making the largest amount of investment to the United States,' while South Korea's acting president Han Duck-soo convened emergency meetings and vowed an 'all-out' response.
Canada's Prime Minister Mark Carney pledged to 'fight these tariffs with countermeasures,' reflecting the combative stance many affected nations have taken in response to what analysts describe as the most significant disruption to global trade patterns since the aftermath of World War Two.