Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The UAE is expected to be among the least affected by the upcoming US tariff regime set to take effect after a 90-day pause announced on April 9, 2025, according to an assessment by S&P Global Market Intelligence.
Under the new rules, all imports from the UAE to the US will be subject to a flat 10% tariff. However, this will have minimal impact since aluminum—UAE’s largest non-oil export to the US—has already been subject to a 10% tariff since 2018 under Section 232 of the US Trade Expansion Act. In 2024, aluminum accounted for 15% of total US imports from the UAE, a segment that remains unaffected.
Moreover, US energy imports are exempt from the new tariffs, and when combined with aluminum, these two product categories represent about 40% of total UAE exports to the US. This insulation from the harshest effects of the tariff regime gives the UAE a strategic advantage as global trade tensions rise.
S&P also pointed to broader macroeconomic benefits for the UAE stemming from currency dynamics. With the US dollar weakening in response to the tariff announcement, the UAE dirham—pegged to the dollar—has also depreciated, improving the cost-competitiveness of UAE exports in non-dollar markets. “The upside is the competitiveness of the local production will be improving,” the report stated.
Monetary policy trends could also work in the UAE’s favour. Should the US Federal Reserve pivot toward growth-oriented policies and cut rates in 2025 and 2026, the GCC countries, including the UAE, are likely to follow suit due to their currency pegs. Lower interest rates in the region are expected to stimulate private sector investment and spending, leading to potential upward revisions in growth forecasts.
In a shifting trade landscape, UAE could also benefit from trade and investment diversion. As US firms seek to circumvent retaliatory tariffs from countries like China, they may look to establish production or distribution hubs in the GCC. “The UAE, which has a well-developed trade and infrastructure network, could be a prime beneficiary of this development,” the report said.
Despite the favourable position, S&P warned of some downside risks the GCC countries. Chief among them is the impact of lower oil prices. S&P forecasts Brent crude to average $73 per barrel in 2025 and $69 in 2026, reflecting softer global demand. “Weaker oil prices will likely force governments to revise their investment spending plans or increase borrowing plans, which will have knock-on effects on growth forecasts,” the report noted.
In addition, the weakening US dollar, which lost nearly 10% to the euro and yen and about 7% to the pound between late February and April 23, will increase the cost of goods imports into the GCC and depress the value of dollar-denominated assets. As a result, inflation is expected to accelerate modestly in the GCC countries during the second and third quarters of 2025.
Still, S&P’s overall assessment suggests that, relative to its regional peers, the UAE is better positioned to absorb the fallout and may even stand to gain in some areas as the global tariff conflict unfolds.
