Tariff relief could be on its way, with the US considering easing its recently imposed 10% tariff on exports from Egypt’s Qualifying Industrial Zones (QIZs) as well as on some goods subject to most-favored nation (MFN) tariffs, Commercial Representation Service head Yahya Al Wathiq Billah said at an Egyptian Center for Economic Studies gathering attended by EnterpriseAM. Relief would only be in the cards if Egypt addresses several non-tariff barriers, Al Wathiq Billah said, relaying what was said in a recent meeting between US and Egyptian trade officials.

Why this matters: If 10% is “the new 0%,” a cut below 10% for QIZ or other select categories could be a boon for manufacturers in certain sectors. It would be good not just for folks producing here now — and might help attract FDI to the market as companies scramble for preferential access to US markets while also looking to diversify away from China. (The caveat, of course, is “Who else does Trump do a deal with to get below 10%?”)

In exchange for relaxing its own tariffs, US officials are pushing for the removal of non-tariff restrictions in key sectors, including ICT, air freight, and corporate ownership rules, Al Wathiq Billah said. He also said that the Americans have flagged issues including our ban on importing market poultry parts and potato seeds, limitations on outbound data transfers from local data centers (data sovereignty is a hot topic in our part of the world), and the halal certification processes. However, “some of these restrictions can’t be lifted due to national security concerns,” Al Wathiq Billah noted.

The US is said to be open to adding new products covered under the QIZ agreement, but has opposed expanding the pact to cover new geographical zones of Egypt, Al Wathiq Billah said. This could mean that goods, including electronics and leather goods, could be included in the program as long as the 10.5% Israeli content requirement is met. This presents a huge advantage that Egypt could leverage to have a competitive cost advantage over other peer exporters to the US, Al Wathiq Billah noted.

Talks to lower the Israeli content requirement —an Egyptian goal for nearly two decades — remain on pause, with talks suspended following the outbreak of Israel’s war on Gaza.

Tariff relief or not, Egypt is already subject to the US’ lowest rate — and that’s good news for FDI. Al Wathiq Billah described the current moment as a unique chance for Egypt to take advantage of the new US tariff system, particularly in sectors like ready-made garments and textiles — where tariffs on exports from competitors like Bangladesh and Vietnam exceed 40%. The Investment Ministry is already receiving weekly visits from Chinese and Turkish investors exploring opportunities to manufacture in Egypt and re-export to the US, he added. If Egypt moves quickly, it could bring in as much as USD 15 bn in additional FDI, Al Wathiq Billah said.

However, this could be complicated by the US starting to scrutinize origins of the companies and investments behind our exports. In a future phase, the US could impose higher tariffs on Egyptian exports produced by companies with non-national capital — such as those backed by Chinese or Turkish investors — according to Egyptian Exporters Association head Mohamed Kassem. The stated aim of Washington’s new tariffs is to bring back high-value manufacturing to US soil and redraw global trade, which may lead the US to begin verifying the origin of capital behind exporting companies to prevent the circumvention of its tariff regime.

An opportunity in the making? The reshaping of the global trade order could be a chance for Egypt to reposition itself as a manufacturing and services hub, EFG Hermes’ Head of Research Ahmed Shams El Din told us in Dubai on the sidelines of the EFG Hermes One on One investor conference.

The caveat: We need to see more private-sector involvement in the economy for that to work. That means less crowding-out by state actors, Shams said, and more competitiveness to deliver higher returns on capital. Policy is key here, and if the El Sisi administration works hand-in-hand with the private sector, Egypt could emerge from this crisis on a stronger footing, he added.

SOUND SMART #1- Egypt’s QIZ pact with the US and Israel that began in 2005 allows goods made in designated Egyptian zones to enter the US without duties or quotas provided they include around 10.5% Israeli production input. The agreement — which has particularly helped boost Egypt’s textile and garment exports to the US — was set up by the US to deepen regional cooperation and was modeled on an earlier US-Jordan QIZ pact, which Washington viewed as a lever for regional peace and economic integration.

SOUND SMART #2- MFN tariffs are the lowest standard import duties that a country would apply to other members of the World Trade Organization — unless a special trade pact exists between the two. Despite the misleading name, MFN tariffs are not about special treatment, but instead, equal treatment. The US has a long list of products for which it has tariffs, from a 2.5% levy on all passenger cars to a 131.8% duty on shelled peanuts — and everything in between.

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