What Brussels and Abu Dhabi hope to gain from closer trade ties

As global trade fractures along geopolitical lines, the EU has triggered its search for reliable economic partners. The latest effort – an agreement to launch trade talks with the UAE – forms part of a wider strategy to search for alternative markets and respond to growing uncertainty around US tariff policy. This month, President Donald Trump announced plans to impose “ reciprocal tariffs ” of 20 per cent on EU goods and 10 per cent on imports from the UAE. The measures have since been placed on a 90-day pause, pending negotiations. But the uncertainty alone is enough to make EU exporters think twice about shipping across the Atlantic. In response, Brussels is looking to broaden its network of reliable economic partners – and the UAE makes a compelling case. It offers a combination of political stability, strong infrastructure and geographic advantage. Its ports and logistics networks are among the most advanced globally and its location – between Asia, Africa and Europe – gives it reach across key trade corridors. Low-cost energy, investor-friendly regulation and a clear strategy to diversify beyond oil add to the UAE’s appeal. For its part, the EU offers access to a single market of 450 million people across 27 economies – a bloc governed by a common commercial framework and unmatched in its collective purchasing power. External trade in goods and services accounts for more than a third of the EU’s GDP, underscoring its weight in the global economy. Last week, President Sheikh Mohammed and European Commission President Ursula von der Leyen seized the opportunity to move ahead with formal trade talks. Still, the push for stronger EU-Gulf ties is less about immediate economic gains and more about sending a powerful signal. Trade volumes between the EU and UAE are already substantial – the EU is the UAE’s second-largest trading partner, accounting for just over eight per cent of its non-oil trade – and with tariffs on most goods relatively low, a formal agreement is unlikely to shift flows materially in the short term. The sectors that stand to benefit most – including aluminium, petrochemicals and consumer goods – make up only a modest share of overall trade between the pair. What matters is the message: that both sides remain committed to open markets, multilateral rules and supply-chain diversification at a time when much of the global system is trending in the opposite direction – illustrated by Mr Trump’s steep “reciprocal” levies on major US trading partners. The escalating trade war between the US and China , the world’s two largest economies, means that middle powers are seeking insulation. Mr Trump has imposed a cumulative 145 per cent in additional tariffs on Chinese goods; Beijing has responded with retaliatory duties of 125 per cent. The EU and the UAE, both deeply integrated into global trade, share a strategic interest in preserving the multilateral system. Both economies rely heavily on predictable, rules-based commerce – a model increasingly challenged by the fragmentation seen in US-China relations. While a formal deal is now on the table, EU free trade agreements are complex and take years to conclude and ratify. Examples include the EU-Mercosur deal, which has been under discussion for more than two decades. For this reason, EU and UAE officials would benefit from exploring a faster, less formal track alongside formal trade talks. Interim steps could include joint statements affirming WTO rules, commitments to trade facilitation, a mutual rejection of retaliatory tariffs, and other confidence-building measures designed to stabilise relations in the near term. For the EU, that includes efforts to reduce certain dependencies on China. The bloc is deeply integrated with Chinese supply chains in sectors like critical minerals and renewables, which are essential for the EU’s green transition. The bloc has introduced policies like the Critical Raw Materials Act to reduce import dependency on any single country. The UAE offers an alternative corridor for supply chains under pressure. Initiatives like Operation 300bn – a national plan to more than double the industrial sector’s contribution to GDP by 2031 – and Kezad, a vast logistics and manufacturing centre in Abu Dhabi, could establish the UAE as a re-export and production base for firms looking to hedge geopolitical risk. For the UAE , closer ties with Brussels would not only open more channels for export growth but also reinforce its positioning as a diversified, rules-based trading partner. The country has moved to reduce its reliance on fossil fuels, with non-oil trade reaching about $800 billion in 2024 – a 15 per cent increase year-on-year. Recent trade agreements with India, Indonesia and Turkey, among others, underscore a broader push to secure preferential access to leading growth markets. The EU, with a $17 trillion economy and strong global trade links, represents a logical next step in this strategy – even if the immediate opportunity for the UAE to redirect exports away from the US market is limited. In 2023, the country exported around $1.78 billion in aluminium to America, making it the second-largest supplier after Canada. That trade is now subject to a 25 per cent tariff, prompting Abu Dhabi to explore alternative markets, including Europe. While the UAE exported approximately $486 billion in goods globally in 2023, its total non-oil trade – including imports and re-exports – exceeded $800 billion, reflecting a broader economic shift away from hydrocarbons. Redirecting a small share of tariff-affected exports to the EU will not alter global trade flows. But it signals something larger: the Gulf is moving to embed itself more deeply in the centre of the global trading system. What comes next may not be a fully-fledged trade pact but something more provisional – a joint commitment to rules-based engagement, built on WTO mechanisms and political restraint. It would not transform global trade, but it would reaffirm a basic principle: that in an era of fragmentation, policy alignment between dependable partners still matters.