US tariffs will have a “limited” impact on MENA economies, though headwinds may follow, economists say

BMI sees US tariffs having a limited effect on the MENA region: Fitch Solutions’ research unit BMI sees MENA countries (and GCC countries in particular) being safe from direct tariffs from the Trump administration due to “economic and strategic considerations,” it said in its MENA Monthly Outlook Report (pdf). While exports from the region will not be significantly affected, there could be an impact on oil prices and inflation, with more debt-ridden emerging markets set to feel the brunt of the impacts.

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Tariffs on the UAE and Saudi Arabia would be “counterproductive”: The report argues that the two countries’ investments in the US — specifically in AI — along with close relations with US President Donald Trump would make tariffs on both countries “counterproductive,” especially as Trump looks to “expand the Abraham Accords and reduce China's influence in the Middle East,” the report reads.

The impact on the oil market: “The macro outlook for MENA (Middle East and North Africa) is set to be weighed down by global tariff uncertainty indirectly through oil prices, to the extent that tariff and macro uncertainties continue to be a drag to Brent oil prices,” Standard Chartered MENA Economist Carla Slim told CNBC. While tariffs could drive up the price of oil in the short term, providing a boost to oil-exporting economies, a resulting slowdown in global trade could offset tangible benefits, especially for countries like the UAE that are looking to establish themselves as logistics hubs.

Interest rates to stay higher for longer: A move from the US Federal Reserve to keep monetary policy tight for the remainder of the year would represent a “dilemma” for policymakers in the GCC, “especially as the inflationary environment is benign” — but it would also create “head-winds for the non-oil economy” in Gulf countries, according to the report. Tighter monetary policies could trigger a downturn in private sector investment and growth for economies like Saudi Arabia and the UAE, S&P Global said earlier.

Countries with high foreign debt, like Egypt, Jordan, and Lebanon, are at particular economic risk, CNBC said, as the cost of servicing this external debt could rise on the back of a higher valued greenback.

A stronger USD will lead to depreciatory pressure on the EGP, as well as several other currencies in the region, the report reads. Egypt will be among the most affected by this, as “it could slow the decline in price growth, hinder the monetary policy easing cycle, and adversely impact economic growth.” Additionally, a subsequent move to keep monetary policy tight in the US could contribute to a general risk-off sentiment for investors, which could cause outflow risk for portfolio investments, according to BMI.

MARKETS THIS MORNING-

Asian markets are mostly on the rise, though China’s CSI 300 is flat after China announced it would boost people’s income in a bid to revive consumption. Japan’s Nikkei and South Korea’s Kospi are both up by more than 1%.

Wall Street futures signal another disappointing open, after a brutal week that saw sell-offs wipe bns of USD in value of US stocks, and sent the S&P 500 into correction territory.

THE CLOSING BELL-

The EGX30 rose 0.2% at yesterday’s close on turnover of EGP 3.8 bn (8.5% above the 90-day average). Local investors were the sole net buyers. The index is up 5.4% YTD.

In the green: E-finance (+5.6%), Qalaa Holdings (+4.8%), and Beltone Holding (+3.7%).

In the red: Rameda (-2.8%), Eastern Company (-2.8%), and Ibnsina Pharma (-2.3%).