President Donald Trump on Thursday signed an executive order imposing “reciprocal tariffs” on trading partners, with the move aimed at reducing the trade deficit, raising revenue for the US and tackling what he claims are unfair practices.
Mr Trump signed the directive, which he said would strengthen the US economy, in the Oval Office, where he also threatened a 100 per cent tariff on Brics countries if they decide to replace the US dollar as their reserve currency.
"If they want to play games with the dollar, then they're going to be hit with a 100 per cent tariff the day they mentioned that," he told journalists. "And they will come back and say, we beg you, we beg you not to do this, Brics is dead."
Brics originally consisted of Brazil, Russia, India, China and South Africa, but it has expanded to include the UAE, Egypt, Ethiopia, Indonesia and Iran. The group does not have a common currency, but long-running discussions on the subject have gained some momentum after the West imposed sanctions on Russia over the war in Ukraine.
A senior US administration official said the tariffs would be customised based on each trading nation's profile with respect to “tariffs” imposed on the US, including the VAT rate.
“First, America runs its more than a trillion-dollar pernicious trade deficit because the major exporting nations of the world attack our markets with punishing tariffs and even more punishing non-tariff barriers,” the official told journalists.
A key target, the official said, is the EU and its VAT, which is essentially a sales tax on goods and services regardless of country of origin. US consumers in most states pay sales taxes too, but these are less than the 20 per cent typically seen in Europe.
Mr Trump has suggested that he might target Europe's car and food sectors, calling the bloc an “atrocity” on trade. The bloc's trade surplus with the US grew to €15.3 billion ($15.9 billion) in August this year, from €13 billion in the same period in 2023, according to official data.
The White House official said a 27 per cent tariff would be imposed on cars coming from EU countries. The official did not say when those would take effect.
In a fact sheet, the White House laid out several examples of unreciprocated tariffs, including a 10 per cent rate from the EU on cars, compared to a 2.5 per cent one from the US.
"This lack of reciprocity is one source of America’s large and persistent annual trade deficit in goods: closed markets abroad reduce US exports and open markets at home result in significant imports, both of which undercut American competitiveness," according to the document.
In December, Mr Trump demanded the bloc reduce its growing deficit with the US by making large oil and gas purchases.
“President Trump has rightly singled out the EU hidden VAT, which more than doubles the EU's tariff on American autos, even as it acts as a massive export subsidy,” the official said. “President Trump's fair and reciprocal plan will put a swift end to such exploitation of American workers.”
The move came hours before Mr Trump was scheduled to meet Indian Prime Minister Narendra Modi at the White House. Mr Trump has described India as a “very big abuser” of trade ties with the US and is hoping to reduce the nearly $46 billion trade deficit with the country.
Mr Trump, who took office on January 20, campaigned on promises to impose heavy tariffs, even on some of the country's closest trade partners, as part of his America First agenda.
So far, he has announced 25 per cent tariffs on goods from Mexico and Canada, but those were postponed in exchange for commitments on border security and crime enforcement from both countries. He has, however, threatened to expand tariffs on steel and aluminium from both countries.
Mr Trump has also imposed 10 per cent duties on goods imported from China.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
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