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Experts React: No MENA ally or adversary unscathed by Trump tariffs

MENASource April 3, 2025 • 4:22 pm ET Print this page

By Atlantic Council experts

A “Liberation Day” for the White House, an upset for global markets. President Donald Trump on Wednesday made good on a campaign promise, slapping tariffs spanning between 10 percent and 50 percent on countries across the globe. Almost no ally or adversary has been left unscathed in the sweeping move, and the Middle East and North Africa (MENA) region is no different.

The hit on global markets, unfolding as the US president prepares for a landmark visit to the Gulf, is poised to have both a delayed and dynamic impact across the MENA region, depending on the country.

Some MENA countries, including Saudi Arabia, the United Arab Emirates, and Turkey, are facing the “base rate” of 10 percent.

Still, there are some regional surprises in the execution of this long-promised plan. US ally Jordan, for example, was hit with a 20 percent rate despite a longstanding free trade agreement with Washington. Israel saw a 17 percent tariff rate despite its moves to mitigate such actions earlier this week, and as its US-supported war in Gaza endures.

Our Middle East Programs experts weigh in on this pivotal moment for the global economy, and what it means for the Middle East region already facing a groundswell of destabilizing threats.

Click to jump to an expert analysis:

Racha Helwa: The exporter-importer divide, and more intra-MENA trade

Jonathan Panikoff: Middle East allies can’t escape Trump’s tariffs

Inwook Kim: Down-line risks to Gulf oil economies

Sarah Zaaimi: Hindering Morocco’s EV battery ambitions

Ahmed Tabaqchali: Business as usual for Iraq

Emilia Pierce: Uncertainty for MENA entrepreneurs

The exporter-importer divide, and more intra-MENA trade

While aimed at major economies like China and the EU, these measures are indirectly pressuring MENA economies via higher import costs, potential trade diversion, and energy market volatility. The region faces a complex mix of risks, based on two categories: the Gulf oil exporters and the import-reliant economies of North Africa and the Levant.

Gulf oil exporters are closely watching global demand and price movements. Both Saudi Arabia and the UAE find their direct trade with the U.S. only modestly affected – each was hit with a ten percent US tariff on goods, but energy exports like crude oil are exempt. The bigger concern is indirect. Fears of a trade war-fueled recession have already driven oil prices down; Brent’s steep drop below $75 reflects worries that slower Chinese and European growth could sap oil demand. A sustained downturn would squeeze Gulf revenues and widen fiscal deficits. Saudi Arabia, for instance, needs oil near $96 per barrel to balance its 2024 budget, well above current prices. The IMF estimates the UAE’s breakeven price around $57 lower, but still a concern if prices slide further. Paradoxically, the threat of US tariffs on Russian oil could present an upside: if buyers like India and China divert purchases from sanctioned Russian crude, Gulf producers might gain market share.

For MENA’s oil-importing economies, the tariffs pose a different set of challenges. Higher energy prices (if Russian oil is effectively curtailed) would strain their trade balances and stoke inflation. Jordan actually benefited from cheaper oil last year—its current account deficit shrank to 3.7% of GDP in 2023 amid lower fuel import costs. That trend could reverse if crude prices rebound, enlarging deficits for Jordan and Morocco and pressuring government finances. Egypt, the most populous Arab nation, is especially vulnerable. It depends on imported fuel and wheat, and any supply chain disruption or commodity price spike quickly feeds into consumer prices.

On the export side, US tariffs on autos and other goods could dent manufacturing and trade linkages. Morocco, for example, has become a major automotive exporter, and while it mainly serves Europe, a broader slowdown or trade diversion could indirectly hit its factories and suppliers. Egyptian textiles and apparel, and Jordanian pharmaceutical and garment exports, now face an extra ten to twenty percent duty entering the US, eroding their competitiveness unless they can pivot to other markets.

Many MENA countries are also joining new blocs—Saudi Arabia, the UAE, and Egypt have all pursued closer ties with BRICS and the Asian Infrastructure Investment Bank—to reduce reliance on the Western-centric trade system. In the face of US protectionism, we can expect a broader trade realignment: more South-South commerce, renewed free trade talks with Europe or Africa, and regional initiatives to boost intra-MENA trade.

—Racha Helwa is the director of the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. Helwa is a senior economist with twenty-two years of professional experience in economic and financial policy analysis and implementation.

Middle East allies can’t escape Trump’s tariffs

It turns out that what Trump announced yesterday aren’t reciprocal tariffs at all. As others have pointed out, the administration simply calculated the US trade deficit with each country and divided that by the country’s exports to the United States. The result is the new tariff rate for each country. In doing so, the president is seemingly ignoring the nuances of existing free trade agreements, and ironically, of actual foreign tariffs, placing higher tariffs on countries like Jordan with whom the United States has fewer barriers, and lower tariffs on countries such as Egypt**,** which has higher barriers.

Many GCC countries will be relieved that energy is exempted from the new US tariffs, since most of their currencies—including Saudi Arabia, Qatar, Oman, and the UAE—are pegged to the dollar. As a result, while they may escape the primary implications of tariffs in the energy sector, an increase in US inflation will have a direct secondary impact on GCC countries (and Jordan, which also pegs to the dollar).

Add to that, the potential for a global trade war would almost certainly undermine global energy demand. Most GCC states are still dependent on energy exports as their primary source for revenue. And a country like Saudi Arabia—which is already struggling with lower oil prices than needed to hit its breakeven point (the price of oil required for the Kingdom to balance its budget), let alone to fully fund Vision 2030 projects—is at risk of seeing a contraction in its GDP if such a trade war is bad enough.

In about six weeks**,** President Trump is scheduled to head to the Gulf on his first foreign trip of his second term. With both the UAE and Saudi Arabia having committed to investing at least $1 trillion into the US economy over the next decade, perhaps there will be greater leverage and opportunity to negotiate with President Trump. However, Arab energy producers are going to be impacted by the tariffs, even if not directly. And even closer allies, such as Israel, which removed all tariffs on US goods ahead of President Trump’s announcement, are facing a seventeen percent tariff. As a result, Israeli leaders will now have to expend significant time and energy to convince the administration to reconsider it, which risks distracting them from the country’s more pressing challenges to include the 59 Israelis still held hostage by Hamas, the war in Gaza, and the looming threat from Iran.

President Trump’s “reciprocal tariffs” are hitting both allies and adversaries across the world, and Middle East countries**,** which sought to preempt being impacted by them through promises of investment and removal of their own tariffs**,** are no exception.

—Jonathan Panikoff is Director of the Scowcroft Middle East Security Initiative and a Senior Fellow with the Atlantic Council’s Geoeconomics Center.

Downline risks to Gulf oil economies

If Trump’s tariffs remain in place for the foreseeable future, one of their most disruptive effects would come from a commodity that the MENA region barely exports to the United States—oil. In 2024, the United States imported 715,000 barrels per day (BPD) from the Persian Gulf, accounting for less than ten percent of its total oil imports (8.42 million BPD) or less than three percent of the region’s total production of 30.36 million BPD recorded in 2023. In fact, energy imports are exempt from Trump’s sweeping tariffs, ostensibly making oil one of the few commodities left unscathed on “Liberation Day”.

However, Trump’s tariffs will have profound implications on the global oil trade and, consequently, the MENA’s oil-dependent economies. Tariffs generally dampen market demand by raising consumption cost and introducing uncertainty about the future. US tariffs are likely to weaken the world’s consumption, which in turn would reduce oil demand. As a result, oil prices would decline, dealing a blow to the region’s oil producers.

If history is any guide, a prolonged oil price slump could destabilize the oil economies, with mounting fiscal pressure, potentially leading to reduced public spending. Tariffs are, however, never a one-sided affair; they are an interactive and back-and-forth game. The next move by the region’s oil producers—leveraging their market power—should be closely watched, as the interplay between US tariffs and their response will shape how these evolving challenges unfold.

—**Inwook Kim** is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. He is an associate professor in the Department of Political Science and Diplomacy at Sungkyunkwan University, Seoul. He specializes in the history and geopolitics of oil, the politics of alliances, and international security.

Hindering Morocco’s EV battery ambitions

The ten percent US tariff on Moroccan exports represent a significant setback for the kingdom’s ambitions in the electric vehicle (EV) battery industry. Morocco has been the only African country to have a Free Trade Agreement (FTA) with Washington since 2004 and has developed a growth strategy betting on free access to US and European Union markets—with whom it has standing FTAs.

Morocco has been assertively positioning itself as one of the major contenders in the Electric Vehicle (EV) space**,** thanks to its abundant lithium iron phosphate resources and its ambitious aeronautics and automotive industry. Rabat had vowed that EV batteries will represent 60 percent of its car exports or some 600,000 “Made in Morocco EVs” by 2030.

The country also teamed up with China in November of last year to override US-imposed tariffs on Beijing by investing in a $1.3 Billion Electric Battery Gigafactory in Kenitra, which is poised to become a major hub for battery production, aiming at an output of 20 GWh of lithium-ion batteries and cathode materials and the creation of approximately 2,300 jobs, just for its first phase. The gigafactory targeted mainly the growing electric car market in the US. It had already created discontent among Morocco’s US partners at the time, who were seeking to find ways to halt the Moroccan Chinese circumvention.

Morocco and other MENA countries with active FTAs with the United States, like Jordan, Bahrain, Oman, and Israel, all face uncertainty over their trade partnership statuses. They will all have to figure out what this new wave of tariffs means to their economic interests with Washington and probably start negotiating with the administration new legal frameworks for trade moving forward.

Sarah Zaaimi is a resident senior fellow for North Africa at the Atlantic Council’s Rafik Hariri Center and Middle East programs. She is also the center’s deputy director for communications, overseeing strategic communications, editorial agenda, media relations, and social and digital marketing efforts.

Business as usual for Iraq, but …

The impact of President Trump’s reciprocal tariffs on Iraq is effectively zero. Almost all of Iraq’s exports to the United States are oil, which are exempt from reciprocal tariffs. Iraq follows the principle of reciprocity in its bilateral relationship, however, it is unlikely that it would impose a reciprocal tariff of 39 percent on imports from the United States. Baghdad needs to maintain a strong relationship with the United States in the era of maximum pressure on Iran, particularly as it relates to the revocations of waivers to Tehran-sourced electricity and potentially gas. Thus, it would be business as usual for the US-Iraq trade relationship, which was valued at about $9.1 billion in 2024.

However, the impact for Iraq would be indirect, and felt through lower oil prices as a consequence of lower demand for oil, hence lower prices, due to the risk posed to world economic growth from the US tariffs and potential counter tariffs.

—Ahmed Tabaqchali is a nonresident senior fellow with the Atlantic Council’s Middle East Programs. He is an experienced capital markets professional with over twenty-five years’ experience in US and MENA markets, and the Chief Strategist of the AFC Iraq Fund.

Uncertainty for MENA entrepreneurs

These new tariffs will have particularly serious consequences for developing economies of the Middle East and North Africa (MENA), including long-term impacts on small and medium-sized enterprises (SMEs) in the region.

In many ways, SMEs are the backbone of MENA economies. They are a vital source of job creation and innovation, and many of these businesses are looking beyond their domestic markets and aiming to scale both regionally and globally. US tariffs and the reciprocal tariffs that will almost certainly follow will increase the cost of raw materials, disrupt supply chains, and create market volatility that can severely undercut their growth potential.

More than just higher prices, these policies introduce unpredictability that makes it difficult to plan, invest, and build long-term partnerships. For SMEs already operating on thin margins, this could be the difference between expansion and collapse, particularly for businesses founded and run by already marginalized groups like women and youth that often do not have social and financial safety nets to fall back on. The widespread failure of SMEs would have a multitude of adverse effects, including higher unemployment rates, making it harder for non-GCC countries to transition toward more knowledge-based economies.

While the impacts on individual MENA economies will depend on a wide array of factors such as their level of integration with global supply chains, their dependence on oil, and their trade relationship with the US, the region’s economic prospects are deeply tied to other equally important and more long-term priorities of development, peace, and stability. Economic opportunity is one of the most powerful antidotes to instability and unrest. When people can build dignified livelihoods and envision a future for themselves, they are less vulnerable to extremist recruitment and political disillusionment. Regional governments and international partners have recognized this, investing in economic empowerment and entrepreneurship as critical pathways to inclusive growth and resilience. Policies that restrict global market access or create economic uncertainty or create barriers to new economic opportunity can undo years of progress.

Sustained, inclusive growth in the MENA region is bolstered by open markets, predictable rules, and support for entrepreneurs driving change from the ground up. Anything less undermines the shared goals of prosperity and security.

—**Emilia Pierce** is the deputy director of operations and finance for the Atlantic Council’s Rafik Hariri Center and Middle East programs. Pierce has focused on human rights and community development in post-conflict and fragile environments throughout her career.