"Liberation Day" tariffs have limited direct impact on the GCC but have hurt the oil price

GULF COUNTRIES - In Brief 02 Apr 2025 by Justin Alexander
As a hot take on the impact of the US tariff announcements on the GCC, here are two positives, two negatives, and two areas that are currently unknown. There will be much more to discuss as responses and secondary impacts become clearer. Positives 1. GCC competitiveness in the US (and elsewhere) The GCC avoided reciprocal tariffs. Although Gulf exports will be subject to the 10% general tariff, the products exported do not compete much with US domestic production, at least in the short term, so this shouldn't be too much of a burden and will just increase prices for the US importers. This is an extension of the flat tariffs on aluminum and steel, which have not significantly harmed Gulf exports to the US. Gulf exporters may also gain competitive advantage in other countries they trade with that respond by hiking tariffs on US companies.  N.B. what the US calls "Tariffs Charged to the U.S.A. including Currency Manipulation and Trade Barriers" is not related to actual tariff rates but is rather the ratio of the US trade deficit with a country divided by imports or, for countries where the relative deficit is small or where the US has a surplus (all Gulf states fall into one of these categories) this is set at 10%. For more information, see the US's table of tariff rates and the Executive Order. 2. The GCC's FDI attractiveness In a more protectionist world, the GCC's commitment to free trade stands out. This includes its low general tariff rates, its free trade zones, and its growing number of trade deals. These deals included a pending FTA with the UK and various bilateral deals, particularly the UAE's many CEPAs. This makes import costs for companies more predictable an...

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