Tariff tremors: Trump’s trade offensive and Middle East's economic balancing act

In April 2025, US President Donald Trump announced a series of tariffs impacting numerous countries, including those in the Middle East and North Africa (MENA) region. The reimposition of sweeping tariffs under President Donald Trump’s 2025 trade policy has sent shockwaves through the global economy, and the MENA region has not been spared. Traditionally MENA region is considered a zone of strategic partnerships and energy-driven cooperation with the United States. However, the region now finds itself unexpectedly caught in a new wave of protectionist trade measures. With a baseline tariff of 10 per cent applied across most imports by the MENA region. In fact, there are even steeper rates for select countries like Jordan and Tunisia. But Washington’s message is clear: no exceptions, not even for allies. These tariffs have triggered immediate concern among MENA economies already grappling with fiscal tightening and geopolitical volatility. While energy exports have largely been exempted, the impact on manufacturing, consumer goods, and investment flows is beginning to emerge. Countries with high exposure to American trade are facing the risk of rising inflation, slower growth, and renewed external vulnerabilities. The blanket nature of these tariffs has blurred the lines and prompted questions about the future of US-MENA economic relations.

Tariffs and the MENA region

President Trump’s 2025 tariff policy marked a dramatic shift in American trade strategy, reinforcing his "America First" doctrine. While these across-the-board tariffs were justified under the pretext of correcting trade imbalances and reviving domestic manufacturing, their impact has been far-reaching, particularly for countries that previously enjoyed relatively liberal trade relations with the US. In the context of the MENA region, the policy did not spare traditional allies. Major economic partners such as the United Arab Emirates (UAE), Saudi Arabia, Egypt, and Morocco were hit with the standard 10 per cent tariff. However, what raised eyebrows was the implementation of steeper, “reciprocal” tariffs—as high as 20 percent for Jordan, 30 percent for Algeria, 39 percent for Iraq, 41 percent for Syria, 31 percent for Libya, and 28 percent for Tunisia. These countries, though not major exporters to the US, are heavily dependent on American trade, aid, and investment. The targeted tariff hikes appear to reflect the Trump administration’s perception of trade asymmetries or diplomatic misalignment, reinforcing the transactional nature of the US foreign policy under Trump 2.0.

The policy's suddenness left little time for MENA economies to prepare. While oil and gas exports—especially crude oil from GCC countries—have largely been exempted, a wide array of non-energy goods, including aluminium, fertilizers, textiles, chemicals, and electronics, have become significantly more expensive to export to the US. This not only threatens the competitive edge of MENA exporters but could also result in higher trade deficits and job losses in export-oriented industries. Furthermore, the tariffs signal a decoupling of economic cooperation from diplomatic alignment. Allies like Saudi Arabia and the UAE, who have invested heavily in defence deals and strategic partnerships with the US, were treated no differently than neutral or less aligned countries. This uniformity has fuelled concerns about the erosion of preferential treatment in American foreign economic relations. At a time when many MENA economies are still recovering from inflation, global supply chain shocks, and debt pressures post-Covid, these tariffs introduce yet another external stressor. More critically, they may prompt a reassessment of trade dependencies and accelerate efforts toward economic diversification, regional integration, and pivoting to alternative global partners such as China and the EU.

Sectoral impacts

While the immediate financial hit may be modest for many MENA companies, particularly those in the energy sector, which has been largely exempt, there is growing concern about second-order effects. Higher import costs for machinery, raw materials, and technology sourced from the US could squeeze margins, particularly in construction, manufacturing, and tech-based industries. Additionally, uncertainty in global trade flows could delay investment decisions and strain long-term planning. Companies are increasingly turning to alternative suppliers, renegotiating contracts, and re-evaluating their supply chains to build more resilience. Some are also exploring regional trade partnerships and local production to offset tariff-related risks.

Divergent perspectives

While there is consensus on the immediate economic challenges posed by the tariffs, perspectives diverge regarding their long-term implications. On one hand, the tariffs could act as a catalyst for diversification in many MENA economies, particularly those already pursuing Vision 2030-style reforms, such as Saudi Arabia and the UAE. These nations have been actively seeking to reduce their dependence on hydrocarbon exports by investing in manufacturing, logistics, fintech, and green energy sectors. The tariffs may accelerate this shift by encouraging intra-regional trade and partnerships with non-Western powers like China, India, and the EU. However, countries like Jordan and Tunisia—already struggling with public debt levels exceeding 90 per cent of GDP—face higher exposure to tariff shocks, with potential impacts on consumer prices and job creation. The IMF estimates that a 10–20 per cent increase in import costs could result in a 0.5–1.2 per cent reduction in GDP growth across affected MENA countries, depending on their trade exposure and fiscal buffers. Inflationary pressures may also rise, particularly in the food and consumer goods sectors, where the US imports are substantial. Thus, the long-term impact of these tariffs will likely hinge on each country’s resilience, policy response, and ability to adapt to a shifting global trade environment.

Conclusion

The newly imposed American tariffs present multifaceted challenges for the MENA region, affecting countries differently based on their economic structures, levels of dependency on the US trade, and internal fiscal health. In contrast, more vulnerable economies may experience greater financial pressure, with limited capacity to absorb rising import costs or invest in diversification. The broader concern is that increased trade protectionism may fragment global trade, pushing MENA states to re-evaluate not only their trade routes but also their diplomatic alignments. The situation also opens doors for regional trade blocs and South-South cooperation as countries explore ways to reduce dependence on the US-centric supply chains. Additionally, the rising complexity of global trade relations calls for stronger policy coordination, transparent trade data analytics, and agile regulatory frameworks. MENA countries must now navigate an increasingly uncertain global environment where resilience, strategic foresight, and multilateral diplomacy will be essential tools in safeguarding their economic stability and geopolitical relevance.

Middle East