UAE: GCC countries shielded from ‘first-order effects' of US tariffs
'As we approach the August 1 tariff deadline, uncertainty continues to weigh on global markets,' said Sapna Jagtiani, director and lead analyst for the Middle East at S&P Global Ratings.
'As of July 11, there have been 31 tariff-related rating actions — 25 in North America, four in Europe, and two in Asia-Pacific. (In contrast) The GCC remains relatively insulated from the first-order effects of tariffs given the minimal exposure to US goods trade and the low tariff rates applicable to the countries," she added.
However, Jagtiani warned of potential indirect effects. 'Slower global demand and softer investment flows could primarily hit the region, particularly through fluctuations in oil prices and supply dynamics."
Richard Boxshall, partner and chief economist at PwC Middle East, echoed this sentiment, noting that the recently announced 10 per cent universal US tariff (announced on April 2) is expected to have limited short-term consequences for Gulf economies.
Despite this, certain sectors within the GCC could still feel some pressure. According to the Al Jazeera Centre for Studies, the US has maintained a 25 per cent tariff on aluminium and steel — key exports for countries like the UAE and Bahrain.
Meanwhile, regional economic ties with the US remain strong. During President Trump's recent visit, the UAE, Saudi Arabia, and Qatar announced over $1 trillion in investments into the US.
Elsewhere, in a bid to ease trade tensions, the US and European Union on Sunday reached a deal that imposes a 15 per cent tariff on most EU goods — avoiding a broader trade war. The EU also plans to invest around $600 billion in the US, said US President Donald Trump.
Dh954 billion non-oil fiscal revenue
Despite global uncertainties, GCC countries have made notable progress in diversifying their economies. Jagtiani noted that non-oil fiscal revenue in the region has doubled over the past decade, reaching an estimated $260 billion (Dh954.2 billion) in 2025 — accounting for 36 per cent of GDP.
According to FAB Market Insights and Strategy, the US trade tariffs are clearly set to have a dampening effect on the outlook for global economic activity. 'We currently expect global economic growth of 2.7 per cent this year, followed by a modest improvement, but only to 3.0 per cent in 2026. Within this scenario, we still see structural, tariff-generated inflation pressures as a main hawkish impediment to higher levels of economic expansion,' it said in a note.
On the geopolitical front, S&P's Jagtiani said the current ceasefire between Israel and Iran has alleviated immediate credit stress in the region. 'Nonetheless, we view the ceasefire as fragile, with a potential for re-escalation. The duration and involvement of key actors will be crucial in assessing the potential impact of any renewed conflict,' she added.
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