The UAE’s expanding trade relations, strong diplomatic relations with the US put it in a good spot amid tariff turmoil: US President Donald Trump’s recently announced tariff plan is set to have a less significant impact on GCC economies than it will on other economies in the MENAT region, with all six economies of the GCC set to face a tariff of 10% — however, the effects are expected to be more pronounced in select sectors across GCC economies, Emirates NBD Research said in a research note on its website.

Tariffs on UAE aluminium exports unlikely to have a significant impact: Aluminum — which accounts for 19% of the UAE’s total exports to the US — will be subject to the 25% tariff rate, Emirates NBD writes. However, aluminum exports to the US represented 14% of the UAE’s aluminum exports, and just 0.4% of total UAE exports as of 2023. Fitch Solutions’ research unit BMI agrees that the impact of higher aluminum tariffs on MENA economies will be limited, with global demand to remain strong, offsetting weaker US demand, facilitating export redirection to other markets, and incentivizing the US to reach an agreement with aluminum exporters in the region.

The UAE’s trade activity is set to minimize the fallout from the tariffs: “The UAE in particular has also actively pursued trading relationships with many economies around the world to reduce trade barriers to insulate itself from volatility in global trade flows,” the bank wrote.

Take it from the experts: Abu Dhabi Commercial Bank chief economist Monica Malik said in a report “the GCC should be in a relatively favourable position to withstand headwinds, especially the UAE,” adding that the US is not a key destination for Gulf exports, averaging just c.3.7% of the GCC’s total exports in 2024, according to CNBC. BlackRock’s Ben Powell echoed the region’s relative resilience: “The Middle East — maybe not today, but over time — should be a relative [champion] within that mix,” pointing to strong balance sheets and ongoing energy revenues.

Strong diplomatic relations with Trump will also help: “I do think the Middle East, with the deep relationship with the U.S. that they have, should come out okay,” Powell added, saying this could help with potential tariff negotiations.

Spillover risks: The UAE faces indirect risks from a potential tariff-triggered global recession or stagflation could reduce expat inflows, foreign investment, and consumption, Frontier View said in a note. S&P also warned that US tariffs could dampen growth, investment, and market sentiment, while rising borrowing costs and tighter access to funding may affect exposed sectors.

Malik also warned that a sharp, sustained drop in oil prices poses a more serious threat, potentially impacting spending plans, liquidity, and confidence. We’ve heard the same from EFG Hermes’ head of research Ahmed Shams El Din, though he posits the UAE as one of the least exposed markets in the GCC to oil prices, with Saudi Arabia and Kuwait being the most exposed.

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