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.

UAE aluminium exports unlikely to be impacted: A 25% tariff on US aluminium imports is set to take place on 22 March — and, with the UAE among the top 10 aluminium exporters to the US, the tariff rate on the UAE could be raised by six percentage points. However, BMI expects the impact of higher aluminum tariffs on MENA economies being limited, expecting global demand to remain strong — which would, in turn, offset weaker US demand, facilitate export redirection to other markets, and incentivize the US to reach an agreement with aluminium exporters in the region. BMI expects a compromised 10-15% tariff to be more likely.

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.

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 ADX rose 0.1% on Friday on turnover of AED 870.5 mn. The ADX is flat YTD.

In the green: Space42 (+6.4%), Eshraq Investments (+5.6%), and Burjeel (+3.5%).

In the red: Investcorp Capital (-4.9%), Gulf Medical Projects (-4.7%) and NMDC Energy (-3.9%).

Over on the DFM, the index fell 0.9% on turnover of AED 375.4 mn. Nasdaq Dubai was down 0.4%, and up 1.6% YTD.

CORPORATE ACTIONS-

Taqa shareholders approve AED 4.7 bn in 2024 dividends: Abu Dhabi National Energy Company (Taqa) approved a final dividend of 2.1 fils per share for 4Q 2024, including a 1.4 fils per share base dividend and a 0.70 fils per share variable dividend, according to an ADX disclosure (pdf). This brings total dividends for FY 2024 to AED 4.7 bn. Shareholders also approved the previously declared interim dividends announced in May, August, and November 2024.

RAK Properties will reinvest its net earnings instead of paying dividends to accelerate growth amid record revenue, Wam reports. The company aims to accelerate project development, enhance asset value, and capitalize on Ras Al Khaimah’s growing real estate sector.

REMEMBER- RAK Properties’ net income rose by 32% to AED 280.9 mn in 2024. Revenue rose 40% y-o-y to AED 1.4 bn.