Other BriefingsTrump’s Tariffs Effect on the MENA Region: Overview and Implications
The new Trump’s tariffs disrupt MENA economies, impacting trade, investment, and industrial sectors like aluminum, petrochemicals, and textiles. Gulf nations must diversify markets and enhance resilience to navigate shifting global trade policies.
By Giulia Interesse
On April 2, 2025, US President Donald Trump enacted a sweeping set of new tariffs ranging from 10 to 50 percent on imports from countries around the world, including key allies and strategic partners. This move, framed by the administration as a “Liberation Day” for American industry, is set to have wide-ranging effects on the global economy—and the Middle East and North Africa (MENA) region is no exception.
While energy exports remain exempt, the tariffs touch virtually every other sector, disrupting trade flows, weakening market confidence, and introducing new layers of political and economic uncertainty.
The MENA region’s response to these tariffs is shaped by its diverse economic makeup, with oil-exporting Gulf states facing risks through global demand shocks, while import-reliant economies in North Africa and the Levant confront rising costs and inflationary pressures.
Countries such as Morocco and Jordan, despite free trade agreements with the United States, have been hit with tariffs as high as 20 percent, calling into question the durability of existing trade frameworks. Moreover, small and medium-sized enterprises (SMEs) across the region—already operating in volatile environments—face new hurdles that threaten to reverse hard-won development gains.
As Trump prepares for a major diplomatic visit to the Gulf, the implications of these tariffs extend beyond economics. This article unpacks the economic and strategic fallout of the tariffs on the MENA region, analyzing both the direct impacts on trade and the broader consequences for regional development.
MENA in the crossfire: Who was hit and how
The latest round of US tariffs—framed as “reciprocal” measures—has introduced new volatility into global trade flows, with direct consequences for economies across MENA. While the policy primarily targets large trade surplus nations such as China and Germany, its sweeping scope has brought numerous MENA countries into the fold, regardless of existing trade agreements or economic alignments.
A 10 percent base tariff has been levied on imports from Saudi Arabia, the United Arab Emirates (UAE), and Türkiye, despite their status as long-standing economic partners of the United States. For Saudi Arabia and the UAE, both significant sources of capital investment and key suppliers of energy and petrochemical products, the direct effect may be limited due to relatively narrow export baskets to the U.S. However, sectors with niche exposure—such as aluminum and certain manufactured goods—may see margin pressure as a result of increased duties.
More notable is the 20 percent tariff imposed on Jordan, which maintains a Free Trade Agreement (FTA) with the United States. The FTA, active since 2001, has facilitated significant growth in bilateral trade, particularly in apparel and textiles. The higher tariff rate could undermine the cost advantage Jordanian producers have relied on to access U.S. markets, potentially weakening order volumes and pressuring employment in export-driven sectors.
Countries such as Egypt and Morocco, though not singled out with elevated rates, remain exposed to indirect trade disruption. Egypt’s apparel sector, for instance, exported over US$1.1 billion to the US in 2023, and may face reduced competitiveness if U.S. buyers seek lower-cost sourcing from non-tariffed markets. Morocco’s integration into global automotive and aerospace supply chains means any contraction in demand or reshoring of manufacturing by US firms could negatively affect local production and investment flows.
What sets this tariff round apart is the way it sidesteps traditional trade norms. By applying duties based primarily on bilateral trade deficits, the policy overrides preferential agreements and disregards the role of value chains in determining trade balances. This creates uncertainty for countries that have historically relied on frameworks such as FTAs or strategic economic partnerships to safeguard access to the US market. For MENA exporters, this new reality necessitates a reassessment of market strategies, cost structures, and diversification plans.
Economic fallout across MENA economies
Oil exporters: Indirect pressure from global demand shock
While energy exports from MENA countries have been exempted from the latest round of US tariffs, the broader implications of a potential global trade slowdown are weighing heavily on the region’s oil-exporting economies. The protectionist wave, if it leads to a broader deceleration in global industrial activity—particularly in China and Europe—could result in weaker demand for crude oil and refined products. In recent weeks, Brent prices have already shown signs of softening, as markets price in the risk of reduced global consumption.
This presents a fiscal challenge for countries such as Saudi Arabia, whose budget breakeven oil price is estimated at around US$96 per barrel. A sustained drop in oil prices would jeopardize not only fiscal stability but also the country’s ability to finance large-scale economic diversification initiatives under Vision 2030.
In contrast, the UAE maintains a significantly lower breakeven threshold at approximately US$57 per barrel, affording it greater resilience in the short term. Still, with exports of aluminum and precious metals facing new tariffs—and broader uncertainty clouding investment flows—Abu Dhabi and Dubai-based firms are closely monitoring trade developments. The emphasis from major players such as DP World and Emirates Steel on agility and regional diversification reflects a wider shift toward insulating supply chains and margins from future trade volatility.
Oil importers: Caught in the crosswinds
For oil-importing economies like Egypt, Jordan, and Morocco, the risks are reversed but no less severe. These countries, which are already grappling with inflationary pressures and external debt constraints, may face increased import costs if oil prices rebound sharply amid market volatility. Even in the current context of softening crude prices, uncertainty itself creates price instability that complicates budget planning.
Many of these countries peg their currencies directly or indirectly to the U.S. dollar, which transmits the effects of US monetary policy and trade-driven inflation more acutely into domestic economies. For instance, Egypt’s exposure to grain and fuel imports makes it particularly vulnerable to external price shocks, while Tunisia and Morocco face similar risks in their food and transport sectors.
Gulf industries and the US tariff challenge: Who stands to lose?
As the dust settles on the President Trump’s latest round of trade tariffs, businesses in the Gulf are sifting through the implications. While no single sector faces an existential threat, the potential for long-term disruption is significant.
Aluminium and the price of protectionism
The Gulf’s aluminium producers, led by Emirates Global Aluminium (EGA) in the UAE and Aluminium Bahrain (ALBA), have long been key suppliers to the US market. In 2024 alone, the UAE exported over 347,000 tonnes of aluminium to the US, making it one of the top three foreign suppliers. With a 10 percent tariff now in place, Gulf aluminium finds itself in a precarious position—still competitive, but no longer at an advantage.
In theory, aluminium is an industry that should be able to weather these changes. The region benefits from cheap energy costs, keeping production expenses low. But margins are tight, and buyers in the US may soon look elsewhere, particularly if Canada—the largest aluminium supplier to the US—leverages its tariff-free access under the USMCA agreement.
The response from Gulf producers will likely involve diversification efforts, focusing on Europe and Asia, while also shifting toward more high-value products like specialty aluminium alloys.
Petrochemicals
At first glance, the Gulf’s petrochemical giants, such as Saudi Aramco, SABIC, and QatarEnergy, seem insulated. The US relies heavily on Gulf-sourced polymers, fertilizers, and refined chemicals. But the risks lie beneath the surface. Tariffs aside, the real issue is demand destruction—if US manufacturers face higher costs for raw materials and intermediate goods, their output will shrink, leading to weaker demand for Gulf exports.
Saudi Arabia, in particular, has been expanding its downstream petrochemical sector, moving beyond crude oil into refined products, plastics, and specialty chemicals. The new tariff environment may accelerate these efforts, as firms look to hedge against potential long-term restrictions on Gulf exports to the US. Meanwhile, there is growing interest in redirecting volumes toward Asian markets, particularly India and China, where industrial demand remains strong.
Pharmaceuticals
The Gulf’s pharmaceutical industry is still in its early stages but has been making strides—especially in Saudi Arabia and the UAE. Saudi pharma exports to the U.S. have been rising steadily, driven by government incentives and investment in biopharma manufacturing. A tariff-induced slowdown in exports could put the brakes on some of these growth plans.
For now, the region’s pharmaceutical firms are adopting a pragmatic approach. While the US remains an attractive market, the real opportunity may lie in deepening ties with Africa and South Asia, where demand for cost-effective medicines continues to rise. Some firms are also exploring partnerships with European manufacturers, leveraging Gulf-based production for export to non-US markets.
Steel and construction materials
With new US tariffs pushing exporters like China to redirect steel shipments to other markets, Gulf manufacturers may face increased competition in their own backyard. The region’s construction sector remains a key driver of demand for steel and related materials, but a glut of cheaper imports from Asia could erode local pricing power.
As a response, Gulf steelmakers are increasingly looking at expanding into African infrastructure projects, where demand for construction materials is growing.
What comes next?
While the US tariff measures may not deal a devastating blow to Gulf industries, they introduce a new layer of complexity. The real risk is not in direct tariffs, but in second-order effects—supply chain shifts, cost realignments, and global demand fluctuations.
For Gulf businesses, the challenge is clear: diversify markets, build resilience, and invest in higher-value production. The coming months will reveal whether these strategies can offset the turbulence of shifting trade policies.
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