The global trade war triggered by U.S. President Donald Trump shows no sign of abating, with tit-for-tat tariffs hammering major economies, tanking stock markets and dimming growth prospects.
The economies concerned – North America, the European Union, and China – face highly uncertain futures. But for the Middle East, which has so far been spared of additional levies, there are still reasons to worry – as well as opportunities to take advantage of.
Direct impact from tariffs, like the U.S. levies on steel and aluminum imports, have just a minimal impact on the Middle East, economists say. The Gulf region, for instance, accounted for roughly 16% of U.S. aluminum imports in 2024, led by the United Arab Emirates and Bahrain, Standard Chartered MENA Economist Carla Slim told CNBC. While those sectors may be affected, analysts say, the hit will be minor.
But the blow to growth from a trade war is likely to hurt the price of oil, the mainstay of the region’s economy. There are also immediate costs to countries whose currencies are pegged to the dollar, such as Saudi Arabia, the UAE, Qatar, Oman, and Bahrain.
Oil, dollars and debt
The U.S. dollar has been selling off since the start of the year, making imports for countries with dollar pegs more expensive – a challenge for a region highly dependent on goods from abroad.
Trade tariffs implemented by the U.S. typically make the greenback stronger over time, however – if that happens, oil becomes more expensive, as the commodity is traded in dollars. This would give an initial boost to oil-exporting Middle East countries.
But bad news may lie ahead as oil demand slows due to weakened global trade and shipping.
