A number of weeks have passed since President Trump announced a sweeping set of trade tariffs, targeting America’s trading partners. The introduction of tariffs caused turbulence in financial markets, with many stock market gains over the last couple of years being wiped in just days.
In this article, we take a close look at what Trump’s increased tariffs mean for the Middle East and North Africa (MENA) region, in the short and the longer term.
‘Liberation day‘—a recap
Most countries in the MENA region ‘got off lightly’ by comparison to others following the imposition of Trump’s increased tariffs.
Regional heavyweights such as the United Arab Emirates and the Kingdom of Saudi Arabia are only subject to the baseline tariff of 10%, whereas other countries (such as Jordan, Morocco, and Israel) were hit with tariffs of up to 20%. Certain countries in the region were not as fortunate, with Algeria, Syria, and Iraq being hit with higher tariffs in the region of 30-40%.
Following the initial shockwaves, the 90-day suspension provided some respite. However, the expectation that the suspension will remain permanent has since been dampened by subsequent statements made by the Trump administration.
The short-term impact
The most significant short-term impact has been a drop in the average price of oil. The price has now dropped to levels not seen in years due to the double impact created by: (i) the fear that there will be a global economic slowdown; and (ii) economic uncertainty. This causes investors to look toward safe-haven commodities and other financial instruments, such as gold and bonds.
In an additional blow to oil prices, and in what appears to have been an attempt to appease Trump, the Organisation of the Petroleum Exporting Countries (OPEC+) recently announced that production levels would increase. This caused the average price of oil to drop even further.
The longer-term impact
A longer-term decline in oil prices can create difficulties for oil-dependent economies, where price drops translate directly into budget shortfalls, slower economic diversification efforts and general uncertainty in long-term fiscal planning.
The Middle East is also strategically positioned at the crossroads between Europe, Asia, and Africa. Ports, free zones, and logistics hubs depend on the efficiency of global trade. However, US tariffs have since prompted many multinationals to reconsider their supply chains.
With many currencies in the MENA region also pegged to the US dollar, a longer-term devaluation can create inflationary pressure. Those in less-prominent markets such as aluminium and steel production will also see a downturn in demand as the US begins to favour domestic manufacturers.
Is it all bad news?
In short, no. In times of uncertainty there are always opportunities.
If the US maintains its ‘America First’ policy, there will be a clear need to diversify supply chains and to consider alternative markets. The Middle East’s strategic location creates opportunities for countries in the region to take advantage of any global realignment.
Much of the necessary infrastructure is already available or is in development. The Middle East also provides a stable, neutral ground for business and logistics. With tariffs making Chinese goods more expensive, there will be a golden opportunity for manufacturing to grow in the region.
In conclusion, US tariffs are rewriting global trade rules, and many countries are struggling to adapt.
Middle Eastern economies find themselves well-positioned to try and grow their influence, to boost exports, and to reposition their economies for the future. However, doing so requires vision, speed, and strategic coordination—particularly around industrial policy and trade infrastructure—which they have continually demonstrated in recent modern history.
By Menelaus Kouzoupis, partner, and Alan Scurry, associate, at Stephenson Harwood, Dubai. Read more about Trump’s trade strategy.
