US tariffs on Saudi Arabia likely to have a limited effect, analysts say

The Trump administration's decision to impose a 10% tariff on all imported goods continues to cause global market turmoil. The direct impact on Saudi trade is expected to be limited due to the relatively low volume of exports to the US. Still, spillover effects from global volatility and declining oil prices remain a concern. Strong bilateral relations, including potential upcoming visits and investment deals, could help mitigate the economic impact.

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IN CONTEXT- The Trump administration slapped a 10% tariff on the Kingdom on Saturday as part of a sweeping tariff on all imports to the US. Higher rates — up to 50% — on goods from 57 countries are set to kick in on 9 April. The scope and magnitude of the action have been felt worldwide, with trade experts like former White House trade adviser Kelly Ann Shaw describing the move as “the single biggest trade action of our lifetime” in comments to Reuters.

The tariff formula: US President Donald Trump personally chose a formula based on two variables, the trade deficit with each country and the total value of its US exports, the Washington Post wrote, citing two sources it said are familiar with the matter.

We’re already running a trade deficit with the US: Our trade deficit with the US increased 121.6% y-o-y to USD 443.3 mn in 2024, according to the Office of the US Trade Representative. The US exported USD 13.2 bn to the Kingdom in 2024, down 4.8% y-o-y. Meanwhile, imports — which will face the 10% tariff — reached USD 12.7 bn, a 19.9% y-o-y decline. White House officials justify targeting countries already running trade deficits with the US by saying they would run even larger deficits if their trade policies were fairer, Reuters reports.

The direct impact of US tariffs on Saudi trade is likely to be limited, given the relatively modest volume of Saudi exports to the US market, Al Mal Chief Investment Officer Faisal Hasan told Asharq Business. “As for economic activity in the region, it may not be significantly affected because the region's exports to the United States are not as strong as those seen in Canada, Mexico, and China,” he said.

More analysts concur: Gulf states, including Saudi Arabia, are seen as the least affected by Trump’s tariffs, with “moderate and reasonable” responses expected from traditional US allies in the region, US billionaire investment analyst Kenneth Fisher told Aleqtisadiah.

Strong bilateral relations could help shield our economy: Trump may be visiting the Kingdom as early as next month, with mid-May reportedly pegged as the potential timeframe for the trip. The visit will focus on finalizing USD 1 tn in Saudi investments in the US, after Crown Prince Mohammed Bin Salman already pledged an additional USD 600 bn package to increase its investment and trade portfolios with the US over the next four years back in January.

BUT- spillover risks from global volatility remain: Selling pressure in global markets could spill over due to the interconnected nature of the global economy, Hasan warned. Gulf markets, including Saudi Arabia, will also feel the effects primarily through investor sentiment and oil prices, which are tied to global demand, Divye Arora, head of portfolio management at Daman Investments, told Asharq, adding that if trade wars dampen global growth, oil demand will likely decline, putting downward pressure on prices.

Shifting investor strategy: Volatility may drive foreign investors away from equities and toward safer assets like bonds and money markets, according to Arora, who expects continued sell-offs over the next month or two.