Companies in the Middle East are bracing for a future with higher prices and increased costs but are still likely to face a relatively smaller direct hit from US President Donald Trump's reciprocal tariffs, analysts have said.
Egypt, Morocco, Lebanon, Iran and Sudan will have a tariff rate of 10 per cent. That is lower than levies on Israel of 17 per cent. Tunisia has a tariff rate of 28 per cent, Jordan 20 per cent, Algeria 30 per cent and Libya 31 per cent. Syria and Iraq are now subject to tariffs of 41 per cent and 39 per cent, respectively, indicating that Middle East countries will have varying fortunes with how their businesses are affected by the US tariffs.
Executives at regional companies are seeking further clarity on how the new levies will affect their operations and wider sectors, while preparing contingency plans to mitigate any potential fallout and adapting to disruptions to global trade.
"When businesses don’t know what trade will look like [in the] next quarter, they stop hiring, stop investing and freeze plans,” said Nigel Green, chief executive of global financial advisory giant deVere Group. "That ripples through to consumers. This chilling effect is how recessions begin."
Dubai-based DP World, the global ports operator with terminals from Peru to Australia, said on Thursday that businesses will face "significant" adjustments in response to the tariffs.
'With tariffs increasingly shaping policy, we recognise that businesses are facing significant adjustments," the company said in a statement to The National. "As supply chains realign, new manufacturing and trading hubs may emerge in response to shifting cost structures and market access considerations."
"For cargo owners, this environment brings challenges that require greater flexibility and adaptability. At DP World, we are working closely with our customers to navigate these complexities – helping them maintain continuity, find efficiencies and build resilience in an evolving global landscape."
The White House on Wednesday announced 10 per cent reciprocal tariffs on the UAE and Saudi Arabia, saying the two countries charge the US a similar amount.
Last year, the Office of the US Trade Representative reported a trading surplus of $19.5 billion with the UAE. US exports to the Emirates amounted to $27 billion, while UAE exports to America were valued at $7.5 billion. The primary exports from the UAE are precious stones and jewellery, followed by aluminium.
“Given the high-profit margins associated with precious stones and jewellery, and the UAE's status as a low-cost producer of aluminium, the impact on UAE businesses is expected to be minimal,” Deepak Mehra, chief economist at Commercial Bank of Dubai, told The National.
"Other exports from the UAE's private sector, such as electronics, machinery parts, optical equipment and plastics, are of lesser value and are unlikely to significantly affect local businesses. These businesses can either adjust their margins or find alternative markets that are closer and have lower shipping costs. Notably, there is minimal services trade between the US and the UAE."
The UAE steel companies said the US reciprocal tariffs do not apply to steel products, as the metal is already subject to the existing Section 232 framework, which imposes a 25 per cent tariff on such imports into the US.
This means Emirates' steel companies will continue to operate under the same regulatory conditions as before, said Michael Rion, chief commercial officer at Emirates Steel, part of the UAE's Emsteel Group.
The top exporters of aluminium to the US last year included Canada, with more than 3.15 million tonnes, the UAE (347,033 tonnes) and China (222,871 tonnes), according to US International Trade Administration data.
"Our exports to the US represent a limited portion of our overall sales, and as such, the direct impact on Emsteel is expected to be minimal," Mr Rion told The National.
However, such protectionist trade policies have broader implications for global steel trade flows.
"Steel exports originally destined for the US may be redirected to other markets, potentially affecting global pricing dynamics," Mr Rion said. "Additionally, major steel-producing countries, such as China, could shift their exports toward regional markets, which may exert competitive pressure on Gulf-based manufacturers."
Emsteel continues to adapt to global trade developments and leverage its diversified export portfolio, he said.
"While challenges exist, we see opportunities in strengthening regional trade" and exploring new markets, he added.
UAE cable maker Ducab said that while the new US tariffs pose some challenges, the company's strategy for diversified sourcing, supply chain agility, market expansion and strong supplier relationships equip it to mitigate these impacts effectively.
Ducab Metals Business, a unit of Ducab Group produces aluminium and copper rods used in the construction and power sectors, and exports to more than 75 countries. The US and Europe are its biggest markets for aluminium products.
"Ducab has structured its operations to navigate such shifts through diversified sourcing. This strategy ensures that the company is not overly reliant on any single source of materials, thereby reducing vulnerability to tariff-induced price fluctuations," Ducab group chief executive Mohammad Almutawa told The National.
Ducab is also focusing on expanding its export markets. "By broadening its customer base globally, the company can offset potential losses or increased costs in markets affected by the US tariffs," Mr Almutawa said.
The company's long-term partnerships with suppliers are helping in stabilising costs so that Ducab can secure materials at consistent prices, providing reliability for its customers, he added.
An agile supply chain strategy is also helping Ducab "to quickly adapt to changing market conditions and regulatory environments, ensuring that it can continue to meet customer demands without interruption", he said.
Potential benefits
While the UAE's economy could face "more pronounced effects" should oil prices decline due to escalating trade tension that affects global economic activity negatively, the country benefits from one of the lowest break-even oil prices in the Gulf, providing it with "a fiscal cushion" in the case of prolonged price weakness, Mr Mehra of the Commercial Bank of Dubai said.
UAE businesses may also stand to benefit from rising trade tension between the US and China, analysts have said.
"With a total of 54 per cent tariffs on Chinese goods, Chinese manufacturers may face excess capacity, leading them to offer products to the global market at reduced prices," Mr Mehra added. "This scenario would allow UAE-based businesses to source final products, raw materials and equipment from China at lower costs, enhancing their competitiveness by passing on better prices to their clients."
The 10 per cent tariff on Gulf countries may increase their exports to the US in relative terms because the tariffs applied to Gulf exporters are much lower than those on many major economies that compete with them in the US market.
"There may be opportunities in sectors where Gulf companies have US competitors in markets that respond by hiking tariffs on the US. I don't think there is much incentive for Gulf companies to invest in the US in order to 'avoid' the 10 per cent tariff rate, but the GCC's appeal as an investment destination should increase even more, as one of the remaining bastions of free trade," said Justin Alexander, director of Khalij Economics.
More expensive goods
The US tariffs will push prices higher on thousands of everyday goods – from phones to food – and that will fuel inflation at a time when it is already uncomfortably persistent, deVere Group said. “Tariffs are taxes – plain and simple – and American consumers will bear the brunt,” Mr Green said.
Dubai-based luxury retailer Chalhoub Group said it does not anticipate a big impact on its operations or consumers, as it operates largely in the Gulf and does not import many US products.
Andreu Marco, chief operations officer at Chalhoub Group, told The National: “We don’t import many products made in US. Even though we represent some American brands, their production is done mainly in Europe or in Asia.
"Import duties have not changed in the UAE with relation to these countries, so the impact for us is very small. If the UAE decides to increase import duties from these manufacturing countries, that would have an impact on us. But that’s not the case.”
Chalhoub Group does have a few exports to US currently, mainly products for its Level Shoes customers, who will have to pay higher prices for these as they are mainly made in Europe, so the price increase could be up to 20 per cent, Mr Marco said.
“They represent a small proportion of our global sales, because most of our customers and sales happen within GCC countries", especially Saudi Arabia and the UAE, he said.
However, retailers in the luxury fashion industry selling to the US market will be affected by the tariffs as many of these goods are made in the EU. This means US consumers will be “highly impacted” by a potential 20 per cent increase on prices, Mr Marco said.
Jacky’s Electronics expects trade between the US and UAE to be minimally affected, as the 10 per cent tariff is the baseline imposed on all countries.
“For us at Jacky’s, we would have been sourcing more from the US instead of selling into the US, so we don’t expect to see any major impact for ourselves,” said Ashish Panjabi, Jacky’s chief operating officer.
