How GCC Economies are Navigating Trump’s 2025 Tariffs Better Than the Rest

Under Trump’s 2025 tariffs, GCC economies are outperforming regional peers, aided by oil wealth and growing trade ties with Asia.

By Sudhanshu Singh

As the United States revives its trade agenda under President Donald Trump, the ripple effects of blanket tariffs are being felt across global markets. Yet, amid the tariff turbulence, oil-rich Gulf nations are proving relatively resilient compared to many of their trade-exposed counterparts. This resilience stems from fiscal buffers, diversified investment strategies, and their complex but tactically aligned diplomatic relations with Washington.

Gulf states’ economic cushion and exposure levels

According to the Statistical Center of the Cooperation Council for the Arab States of the Gulf, the Gulf Cooperation Council (GCC) countries collectively hold approximately 32.6 percent of the world’s proven crude oil reserves. Furthermore, as noted by GCC Secretary-General Jasem Mohamed Albudaiwi, these nations manage around US$3.2 trillion in sovereign financial assets, 33 percent of the world’s total. This liquidity enables them to absorb economic shocks more effectively than countries with lower reserve coverage or limited foreign assets.

While the GCC does face a blanket 10 percent tariff on exports to the United States under the new tariff regime, its economic exposure is somewhat muted by the limited size of US-bound exports. In 2024, the United States accounted for only around 3.7 percent of the GCC’s total exports.

Within the bloc, the United Arab Emirates and Saudi Arabia lead trade relations with the United States, accounting for 39.6 percent and 37.9 percent respectively of the GCC’s total trade with the US, followed by Qatar (8.5 percent), Kuwait (5.9 percent), Oman (4.5 percent), and Bahrain (3.6 percent).

Broader MENA region and GCC advantage

The relatively contained exposure of the GCC contrasts sharply with the situation across the broader Middle East and North Africa (MENA) region. Trump’s tariff strategy has imposed significantly higher rates on several non-GCC countries on April 2, 41 percent on Syria, 39 percent on Iraq, 31 percent on Libya, 28 percent on Tunisia, and 20 percent on Jordan. These nations not only faced higher trade friction but also lack the financial buffers and energy export leverage enjoyed by the Gulf states.

As a result, while the GCC’s economic resilience is supported by sovereign wealth and diversified global trade, other MENA economies are facing greater macroeconomic strain. The Office of the US Trade Representative reported a 1.6 percent drop in goods imports from MENA to the US in 2024, totaling US$61.3 billion. The uneven tariff landscape across the region underscores the comparative advantage of the GCC bloc.

Oil price volatility remains a core risk

Despite their capital strength, Gulf nations remain vulnerable to oil price fluctuations. The International Monetary Fund estimates that Saudi Arabia requires oil prices above US$90 per barrel to balance its budget. Yet as of March 27, 2025, Brent crude was trading at US$61.44 per barrel. Even the analysts at Goldman Sachs forecast Brent prices at just US$58 for 2026.

A prolonged dip in prices could delay or scale back mega-projects tied to Vision 2030, Saudi Arabia’s flagship economic diversification program. A sharp and sustained oil price fall would require a reassessment of spending plans, potentially affecting banking sector liquidity and wider confidence.

Composition of bilateral trade

The trade structure between the United States and GCC countries is characterized by a complementarity of energy exports and industrial imports. In 2023, mineral fuels dominated US imports from the region, totaling nearly US$19 billion. These flows represent not only the backbone of Gulf economies but also a stable supply line to the US energy market. Other major imports included aluminum (US$2.9 billion), fertilizers (US$1.3 billion), and organic chemicals (US$886 million), all of which are critical to US manufacturing, agriculture, and defense industries.

Conversely, the US exports to the GCC are concentrated in high-value manufactured goods and technology. In 2023, vehicles topped the chart at US$9.3 billion, followed by aircraft (US$7.5 billion), machinery (US$7.3 billion), and electrical equipment (US$5.2 billion). These sectors reflect both American industrial strengths and Gulf demand for infrastructure, logistics, and defense development

Rising relevance of diversification and regional integration

Economists note that while Trump’s tariffs did not trigger Gulf diversification, they are accelerating it. Vision 2030, Alat industrial zone plans, and sovereign fund-led tech and green energy investments are among the initiatives aimed at reducing economic concentration risk.

Recent trade trends further validate this strategic realignment. According to Asia House, Gulf-Emerging Asia trade has outpaced Gulf-Advanced Economies trade growth for over a decade. While 2023 saw a temporary correction, driven by a 17 percent fall in oil prices, trade between the Gulf and Emerging Asia still amounted to US$451 billion, down 12 percent from the record US$512 billion in 2022. Nevertheless, should Gulf-Asia trade continue growing at its 2010–2023 average annual rate of 7.1 percent, it will reach approximately US$682 billion by 2030.

Notably, trade between the Gulf and China is projected to surpass Gulf-West trade by 2027 if historical growth trajectories continue. These shifts are reinforced by deepening investment, deal-making, and bilateral visits in 2024, with Gulf Sovereign Wealth Funds increasingly investing in Asian markets and Asian businesses expanding across the Gulf.

The gap between Gulf trade with Emerging Asia and Advanced Economies has fluctuated, narrowing from US$193 billion in 2010 to US$82.3 billion in 2022, before widening to US$131 billion in 2023 due to the sharper decline in Asian trade. Nonetheless, non-oil sectors in the Gulf continue to attract Asian capital, and demand from Emerging Asia is expected to remain strong, supported by an expanding middle class and 5 percent growth forecasts for 2025 by the International Monetary Fund.

This pivot has been formalized through multiple Comprehensive Economic Partnership Agreements (CEPAs). Between 2021 and 2022, the UAE signed CEPAs with India, Indonesia, South Korea, and Cambodia. These agreements have lowered tariffs, reduced non-tariff barriers, improved market access for goods and services, and harmonized digital trade frameworks, making them instrumental in expanding Gulf-Asia connectivity.

Gulf nations are also actively exploring broader trade partnerships with China, India, Southeast Asia, and Africa, signaling a shift toward a multipolar trade policy stance.

Strategic diplomacy and soft tariff mitigation

Strategic relationships are cushioning the Gulf from deeper tariff wounds. Warm ties with Washington afford Gulf countries greater flexibility in negotiations. Saudi Arabia’s hosting of Ukraine-Russia peace talks and UAE’s economic diplomacy have bolstered regional importance.

In terms of mitigation, Gulf countries are also using trade architecture and reexport channels to absorb shocks. The UAE’s logistics hubs, like Jebel Ali, play a central role in facilitating reexport strategies. Bahrain and Saudi Arabia are similarly investing in logistics and manufacturing ecosystems, though analysts caution that rules of origin restrictions and Trump-era loophole closures reduce efficacy.

In brief

While oil-rich Gulf nations are not immune to Trump’s tariffs, they have fared better than many of their regional peers. Their sovereign wealth, limited US export exposure, diversified trade composition, and preexisting economic diversification agendas provide resilience amid uncertainty. Yet, downside risks tied to oil prices and shifting trade relations demand cautious optimism.

Also read:

• Trump’s Tariffs Effect on the MENA Region: Overview and Implications
• US Trump’s Tariffs on Türkiye: Risks and Opportunities

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