Turning US tariffs into opportunities for the Middle East

13/04/2025 06:19 AST

The US's imposition of tariffs on several Middle Eastern nations signals a shift in trade dynamics, challenging traditional alliances while opening doors for new economic partnerships and diversification in the region.

Gulf Cooperation Council nations, along with Egypt, Morocco, Lebanon and Sudan, are facing a 10 percent US tariff on exports to the US under Trump's new trade policy, targeting what the president described as long-standing unfair practices.

While GCC states were spared the steepest penalties, other Arab countries were hit harder: Syria with 41 percent, Iraq with 39 percent, Libya with 31 percent and Algeria with 30 percent.

Tunisia and Jordan received 28 percent and 20 percent tariffs, respectively.

Despite the levies being on US imports, most GCC countries have trade deficits with America, importing more than they export.

According to the Office of the US Trade Representative, goods imports from MENA to America totaled $61.3 billion in 2024, down 1.6 percent, or $1 billion, from 2023. The US goods trade surplus with the Middle East was $19.1 billion in 2024, a 39.8 percent increase, or $5.4 billion, on 2023.

Strategic intent signals
When the US imposes tariffs, the impact extends far beyond the balance sheets of exporters and importers. These policy tools, while often presented as economic levers, also serve as clear messages about strategic intent.

The most recent round of US tariffs on a variety of goods has sparked concern across global markets, including among trade experts in the Middle East.

Tamer Al-Sayed, chief financial officer at the Future Investment Initiative Institute, told Arab News that the move was part of a broader shift in tone, saying: "Tariffs have never just been about taxes. They are signals. And the message coming from Washington right now is: 'We're prioritizing domestic protection.'"

While such a stance may make political sense in the White House, Al-Sayed believes it introduces a layer of complexity to long-standing economic ties between the US and the Gulf region.Historically, he said, the region has had strong energy and defense trade channels with the US, but in areas such as petrochemicals, aluminum and even some tech-linked components, there is some discomfort.

Tariffs have never just been about taxes. They are signals. And the message coming from Washington right now is: 'We're prioritizing domestic protection.'

He emphasized that the issue extends beyond immediate cost increases, highlighting a broader shift in the tone of the relationship - from collaborative to transactional.

Describing the scene in the region, he noted that it is only natural for businesses and governments to begin asking "tough" questions - such as whether they are overly exposed to a single market, and how they can future-proof their trade strategies.

"That might lead to a bit of a cooling-off in certain sectors while we explore new or alternative partnerships," he said.

Minor impact on exports, rising diplomatic tensions

Yaseen Ghulam, an associate professor of economics and director of research at Al-Yamamah University, Riyadh, told Arab News that US diplomatic relations with their allies in the region are under significant strain due to blanket tariffs on goods imported from these countries.

"Some countries are impacted more due to higher rates and a larger volume of trade. When it comes to Middle Eastern countries, the negative direct impact is not significant," Ghulam said.

However, he said that a tariff of 10 percent on exports to the US will not significantly change their volume of exports to the US.

Ghulam pointed out that incidents and related shocks such as these are not common when one looks at the history of the international trade mechanism developed after World War II.

While US tariffs have not created an immediate need for diversification, they have certainly accelerated the process. (Shutterstock) "The superpowers have always had the muscle to press a reset button. However, the speed and magnitude with which these tariffs have been introduced by the US is in fact unparalleled," he said.

The economist added that the US is a country that has dominated in politics and trade, but senses its dominance is in decline due to emerging larger trading powers such as China.

Domestically, he added, the significant trade deficit the US has had over an extended period has been cited as a reason for the government's inability to upgrade infrastructure and services over the past two decades. He believes that the global community must address US concerns while preparing for a changed trade regime.

"There is also a need for dialogue to come up with arrangements that do not hurt international trade and global consumers, and that also do not give unfair advantages to some countries that have used protective policies for various economic sectors, such as agriculture and automobile manufacture, to the detriment of some exporting countries such as the US," Ghulam said.

New regional opportunities
Among the sectors feeling the brunt of the US tariffs are aluminum and petrochemicals - industries in which Gulf countries such as Bahrain and the UAE have long held competitive advantages.

According to Al-Sayed, these sectors are now grappling with diminishing price competitiveness in global markets with countries such as Bahrain and the UAE having built competitive export ecosystems around these industries.

"When tariffs hit, our price advantage starts to erode, and in a global market, that matters. But it is not all negative. Whenever there is a shake-up like this, new opportunities emerge. For example, sectors like agribusiness or food processing in the region could benefit as supply chains adjust and prices in the US climb," he said.

The FII official added that he sees a potential boost in re-export and logistics hubs such as Jebel Ali. "They can step in to serve rerouted flows," he said.

Al-Sayed also highlighted the growing promise of the region's tech and green economy sectors. "As global players look to hedge their trade exposure, they will want partners who are agile, well-positioned, and policy-stable. That is where we have an edge," he said.

Tariffs amid diversification, regional integration shift
Countries in the region are increasingly prioritizing economic diversification to lessen their dependence on traditional income sources.

While US tariffs have not created an immediate need for diversification, they have certainly accelerated the process. "Diversification did not start with these tariffs. It is just accelerating now," said Al-Sayed.

He pointed out that there is also a shift toward a more regional integration, with the GCC states starting to tighten their economic cooperation.

"In times like these, neighbors matter. So, the US will remain a key player, but the region is clearly tilting toward a more balanced, multi-polar trade approach," he said.

Moreover, he added, these countries, especially under frameworks such as Vision 2030, have been on a mission to reduce overreliance on single markets.

"The current tariff situation just reinforces that urgency. You will notice stronger trade missions and deals being signed with China, India, Southeast Asia, and increasingly with Africa," he said.

Rise of strategic, sector-specific alliances
Looking ahead, Al-Sayed foresees a wave of targeted, sector-specific trade agreements taking shape across the globe. Green energy partnerships with Europe, digital and AI cooperation with Asia, and food security initiatives with African nations, are all part of this evolving trade blueprint.

Al-Sayed said that there is a new mindset emerging, particularly among Gulf sovereign funds and trade ministries, focused not only on importing and exporting but also on influence, access and long-term positioning.

"So, when we invest, we are thinking what market this opens and what network it unlocks. For example, do not be surprised to see strategic joint ventures in logistics, tech manufacturing, or even rare earths, where we co-own supply chains rather than just buy from them," he said.

The financial expert said that the world is rebalancing, and tariffs may seem like small policy tools, but their aftershocks are redrawing global trade maps. "The Middle East, if it plays this right, could come out not just as a player but as a connector," Al-Sayed said.

Arab News