01-08-2025
Middle East businesses brace for higher costs after Trump announces new tariffs
Middle East businesses that trade with the US are preparing for increased costs and operational challenges after Washington introduced a fresh round of tariffs on dozens of countries, including several in the region.
US President Donald Trump on Thursday signed an executive order imposing ' reciprocal tariffs ' ranging from 10 per cent to 41 per cent. The latest measures make small reductions to April's announcement but keep overall rates high for Middle Eastern economies.
Slight reductions but high costs remain
Syria remains the most heavily affected, facing a 41 per cent tariff, unchanged from April. Iraq's rate has been lowered to 35 per cent from 39 per cent, Libya to 30 per cent from 31 per cent and Tunisia to 25 per cent from 28 per cent.
Jordan and Israel were each handed a 15 per cent tariff, down from 20 per cent previously.
The marginal cuts offer limited relief to companies that export to or import from the US. Businesses across the region are expected to face higher costs, tighter margins and potential disruptions to their supply chains as they adjust to the new trade environment.
The modest tariff reductions for countries like Jordan and Iraq offer "little more than cosmetic relief," Peter Middlebrook, chief executive of UAE-based management and investment consultancy Geopolicity, said.
"Key sectors—particularly manufacturing, chemicals, machinery, electronics, and consumer goods—remain under pressure from elevated duties, with limited room to maneuver," he said.
"While energy exports such as oil and LNG remain largely insulated, more diversified economies like Tunisia, Jordan, and Iraq will suffer reduced competitiveness, compressed margins, and higher barriers to the US market."
Businesses in the region that rely on importing US goods now face higher input costs, especially in pharmaceuticals, high-tech components, and industrial equipment.
"This will force difficult choices: either absorb the hit or pass the burden onto consumers. Larger firms may pivot toward alternate suppliers or explore new markets, but for many SMEs, these tariffs create significant headwinds for trade planning, investment certainty, and operational scaling," Mr Middlebrook said.
Compounded by policy unpredictability and the risk of further escalation, the long-term outlook for US relations with its trade partners remains "highly uncertain", he added.
Limited overall trade exposure
The direct impact of the new tariffs is likely to be limited given the region's trade profile, Nassib Ghobril, chief economist at Lebanon's Byblos Bank Group, told The National, noting that exports from the region to the US made up only 4 per cent of its total exports last year, the majority of which were oil.
'Further, oil, natural gas, and petroleum products, which account for about 70 per cent of the Mena region's exports to the world, are exempt from new US tariffs,' he said.
For net oil-importing economies such as Egypt, Jordan, Lebanon, Morocco and Tunisia, exposure is also relatively small, Mr Ghobril said. 'Their total exports to the US amounted to $8.2 billion, while their imports from the US reached $16 billion in 2024.
'Also, their exports to the US accounted for 7 per cent of their aggregated total exports in 2024 and most of their exports are in the form of light manufacturing, including textiles, apparel, jewellery and processed food.'
Trade stability concerns
Dean Mikkelsen, a UAE-based independent maritime and logistics analyst, said the new tariffs have shaken long-standing perceptions of US trade stability across the Arab world.
'For decades, the US was seen as a predictable, cornerstone trade partner,' he told The National. 'This policy of high, fluctuating tariffs changes that perception for everyone … it creates a cloud of economic uncertainty over the whole region.'
He said that small reductions in tariffs do little to reassure businesses or investors. 'They don't build confidence,' Mr Mikkelsen said. 'No one is going to make a major, long-term investment based on a 4 per cent tariff reduction when the entire system feels unstable.'
The tariff schedule acts as 'a tool of targeted economic pressure', with high rates limiting growth in non-oil sectors in Iraq and Libya, undermining Tunisia's olive oil exports, and disrupting technology supply chains between the US and Israel, according to Mr Mikkelsen.
'The most disruptive move is the 15 per cent tariff on Israel and Jordan,' he said. 'It's a direct shock to the deeply integrated US-Israel technology supply chain … even the most strategic and deeply intertwined partnerships are not immune to this new volatility.'
He added that many companies in the region are already pivoting away from reliance on US trade.
'From our vantage point as a global hub, we see this clearly. Companies are building stronger, more resilient trade corridors,' Mr Mikkelsen said.
'This means strengthening ties with Europe for its stability, investing heavily in Africa as the key future growth market, and anchoring their strategy in Asia for its sheer scale.'
Minimal effect on start-ups
While the impact on traditional trade may be muted, questions have also been raised about how these measures could affect the region's start-up ecosystem, particularly tech companies seeking investment from the US.
Fadi Ghandour, executive chairman of Wamda Capital, said the tariffs will have little to no impact on start-ups in the region.
'Most, if not all, of start-ups have regional focus and do not produce physical goods to be exported to the US. They're mostly software or tech based companies,' Mr Ghandour told The National.
He added that very little start-up funding comes from the US and is therefore unaffected by trade policies.
'Most of our start-ups in the region raise money from the region,' Mr Ghandour said. 'Besides, tariffs do not affect VCs that have an interest in investing in the region, that is not relevant to regional companies in the tech space.'
Industries such as manufacturing, automotive, consumer goods and agriculture are still expected to face pressure due to higher costs, particularly in economies with significant non-oil trade with the US.
The tariffs form part of the Trump administration's broader push to reshape global trade relationships and negotiate bilateral deals aimed at securing what it calls fairer terms for the US.
