Trump’s Tariff Policies to Indirectly Impact UAE, GCC, and MENA Region

Dubai: The economic policies of US President Donald Trump, which have caused turbulence in global financial and commodities markets, are expected to have indirect repercussions on the UAE, the Gulf Cooperation Council (GCC), and the wider Middle East and North Africa (MENA) region, analysts say.

According to global ratings agency S&P, Trump’s tariff measures and resulting economic shifts could lead to higher interest rates in the US, subsequently affecting the GCC due to their currency peg to the US dollar. A stronger dollar would further elevate the value of Gulf currencies, potentially making exports less competitive and stifling local production, leading to a slowdown in GDP growth.

Trump recently imposed tariffs on Chinese goods, while suspending planned tariffs on Mexico and Canada. In response, China has formally launched a dispute with the World Trade Organisation (WTO) over the US’s 10% tariff imposition.

Countries in the MENA region with fixed exchange rates to the US dollar, including Saudi Arabia and the UAE, may face tighter monetary policies as the US Federal Reserve raises interest rates to combat inflation. S&P analysts warn that this could stifle private sector investment and limit real GDP growth across the region.

While MENA countries have a moderate level of exports to the US, potential global tariffs could hinder export growth, further impacting economic stability. Additionally, a decline in portfolio inflows into emerging market debt securities could present financial challenges for several MENA economies.

Despite these challenges, Hassan Fawaz, chairman and founder of GivTrade, believes that the GCC could find new opportunities amidst the changing global trade landscape. “Trump’s protectionist policies may contribute to deglobalisation trends, but this could also push the GCC to establish strategic partnerships and diversify trade relationships,” he noted.

Moreover, energy-exporting GCC countries could benefit if the US imposes tariffs on energy products from Canada and Mexico, potentially increasing demand for Gulf oil exports. Saudi Arabia, in particular, may have an opportunity to capitalize on excess production capacity.

However, the region remains vulnerable to market volatility, particularly in the oil sector, as weaker global economic growth could reduce energy demand. The overall impact of Trump’s tariff policies on the GCC and MENA region remains uncertain, with both risks and potential advantages in the evolving economic climate.