Gulf Cooperation Council (GCC) nations appear to have avoided the harshest consequences of President Trump's latest round of tariffs, announced Wednesday. While the UAE and Saudi Arabia will face a 10% tariff on goods entering the US, this is significantly lower than tariffs imposed on countries like China, Vietnam, and even some other nations in the Middle East and North Africa.
President Trump justified the tariffs as "reciprocal," claiming they mirror the duties these countries already impose on US goods. The White House also announced that countries not included in the list will be hit with a 10 per cent baseline tariff, due to go into effect April 5. A White House official said reciprocal tariffs will go into effect April 9.
Analysts suggest that the GCC's relatively low existing tariffs and currency pegs to the US dollar likely contributed to the lower duties. The US also enjoys a trade surplus with the GCC, potentially mitigating the need for harsher measures.
"Given the global nature, the GCC probably got the best outcome they could've got," said Rachel Ziemba, founder of Ziemba Insights. "It's not a good outcome that universal tariffs are now part of how the US is financing itself, but [Gulf] leaders may take it as a partial success that they ended up in this lowest tier of most friendly countries in this new rubric," Ms Ziemba said.
However, experts emphasize that the indirect effects of these tariffs on the global economy represent a greater threat to the GCC. Tariffs are expected to contribute to inflation and slow global growth. The US Federal Reserve anticipates a slower growth rate of only 1.7% for the US economy this year.
"That's not a good thing for the countries in the region through the energy markets," Ms Ziemba said.
Concerns about slower growth have already rippled through financial markets, with Dow Jones Industrial Average futures were also down 751 points, or 1.8 per cent. S&P 500 futures and Nasdaq-100 futures dipped 3 per cent and 3.8 per cent, respectively.
The anticipated slowdown could negatively impact demand for oil and gas, a key sector for GCC economies. Brent futures were down 1.75 per cent at $73.19 per barrel after Mr Trump's announcement.
"The much bigger and more significant impact, which is negative, is the impact this trade war will have on the strength of the global economy, and hence on oil and gas demand. And it's got to be negative," said Justin Alexander, director of Khalij Economics.
Despite the potential challenges, some analysts believe the GCC is well-positioned to weather the storm. As a relatively open economy in a world trending towards protectionism, the region could become more attractive for investment.
"Broadly speaking, the Gulf is in a pretty good position compared to many other countries," Mr Alexander said.