Gulf investors fear Trump tariffs will spark global financial hit

Financial figures warn sweeping Trump tariffs have set off a chain reaction

Global markets have been rattled by US President Donald Trump's announcement of sweeping new tariffs on imports, fuelling fears of a renewed era of protectionism and a potential global recession.

The move has introduced a minimum 10 per cent duty on all goods entering the US, with steeper levies on imports from countries with a large trade surplus with America.

The move, framed by the Trump administration as a bid to “rebalance global trade for the US”, has caused alarm across industries and governments and among investors who view the move as a destabilising act amid an already fragile economic recovery.

The shockwaves were immediate. The Hang Seng Index in Hong Kong plunged by 13.55 per cent – its steepest one-day percentage drop since the 1997 Asian financial crisis – while US indexes and European markets also recorded steep losses.

At the Annual Investment Meeting Congress in Abu Dhabi, The National asked experts for their views on the crisis. The message was clear: this could be the beginning of something far more serious than just a market correction.

“This is the worst crisis coming – even worse than 2008,” said Zayed bin Aweidha, chief executive of Abu Dhabi Investment Group. “Former president [Barack] Obama spoke about it. This is a crisis which usually comes once a century. Before it was in 1929, now it is coming now.”

Mr bin Aweidha compared the current environment to the Great Depression. “The tariff is just the trigger. The problem is economical," he added. "Tariff is just the ignition – just like in 1929. Now, they are doing it again.”

His warning comes amid growing consensus that markets are entering a dangerous phase, where policy uncertainty, inflation and geopolitical fragmentation exacerbate structural weaknesses left over from the Covid-19 pandemic.

Central banks, having spent the past year focused on interest rates and inflation management, are now facing a new wave of volatility that could derail plans for stable growth.

Zayed bin Aweidha, chief executive of Abu Dhabi Investment Group. Victor Besa / The National

Investor confidence, which was already fragile, is eroding further. Nan Li Collins, senior director of the investment and enterprise division at UN Trade and Development, said foreign direct investment (FDI) had weakened for years and that was now set to worsen.

“From 2007 onwards, FDI has been stagnating already and then, recently, because of the increasing geopolitical divide, fracturing trends and the lack of investor confidence, FDI has been dropping,” she said. “With the new tariff announced, it really adds on these problems. It exacerbates all these issues.”

Ms Collins said unpredictability was making it difficult for multinational corporations to plan. “In general, investors want long-term stability ... so more investors are now [going to] really wait and see what’s the next step. That delay is really not good.”

The situation is particularly risky for critical infrastructure sectors such as water, sanitation and agriculture – areas underfunded in many parts of the developing world.

“The large infrastructure investment can’t function on short-term certainty,” she said. “You cannot just change [policy] in the middle of the investment.”

Fahad Abdul Qader Al Qassim, director general of Awqaf Abu Dhabi, said the fallout was being felt already. “It’s a bloodbath. Whatever asset class you think of is bleeding today,” he said.

“Until things settle down and stabilise, it’s normal that companies will panic. And governments will have to adjust accordingly.”

Fahad Abdul Qader Al Qassim, director general of Awqaf Abu Dhabi. Victor Besa / The National

Mr Al Qassim also warned that consumers would feel the effects. “At the end of the day, someone will have to pay the price – and this person will be the consumer, unfortunately. Everything will be passed on.”

While the digital sector has so far remained resilient, particularly in the US, where demand for AI infrastructure and data centres continues to draw global capital, experts caution that this growth is not immune.

“The digital economy is very divided and concentrated between the US and China,” Ms Collins said. “Middle East funds are still investing in US data centres and AI, but these are long-term commitments and constant policy changes erode trust.”

Ms Collins suggested regional co-operation could offer a much-needed buffer against global uncertainty. “If regional groupings start to build at least regional-level co-operation … they can really become a bigger market within themselves and then remove barriers and build up investor confidence.”

Still, optimism was hard to come by. “Now nobody knows what’s going on. This is a hurricane which will take over many countries on the way,” Mr bin Aweidha said. “This is not a game. This is an earthquake shaking the whole world.”

Trump tariffs: Middle East markets tumble after sharp fall in Asia