Caught in the Crossfire: Trade Wars and Their Impact on the Middle East
30 April 2025 (Chatham House Rule)
As global trade tensions escalate, the Middle East finds itself navigating a delicate balancing act between economic giants. From oil price volatility and technology access to shifting alliances and tariff pressures, the region faces unique challenges and opportunities.
Our expert panel explored the ongoing trade wars spearheaded by the US-China rivalry, and how they are reshaping the economic and geopolitical landscape of the Middle East—and what this means for its future stability and growth.
Expert Speakers:
- E. Raja Al Mazrouei, CEO of Etihad Credit Insurance (ECI)
- With over two decades of experience in financial services, Her Excellency played a key role in establishing the highly successful DIFC Fintech Hive. She was appointed CEO of Etihad Credit Insurance in May 2023. Additionally, she serves on multiple boards, including the Mohammed bin Rashid School of Government and the digital bank Zand. Widely recognized as a leading figure in fintech and finance, she has been featured among Forbes’ Top 100 Power Business Women and their 50 Most Influential Women in the Middle East.
- Dr Abdulaziz Istaitieh, Senior Economic Advisor at The Executive Council of Dubai
- With extensive experience in shaping economic policy and contributing to the development of Dubai’s economic strategy, Dr Abdulaziz Istaitieh serves as a senior economic advisor at the General Secretariat of the Executive Council of Dubai. His career journey includes prior positions at the Mohammed bin Rashid School of Government, Dubai Real Estate Institute, and Abu Dhabi Council for Economic Development.
- Justin Whitehouse, Managing Director at Alvarez & Marsal
- Based in Dubai, Justin Whitehouse is a Managing Director at Alvarez & Marsal, specializing in indirect taxes. Alvarez & Marsal is a global firm with 12,000 employees worldwide and $4 billion in firm revenue, known for its involvement in significant restructurings, including Lehman Brothers approximately two decades ago. He brings over 30 years of experience advising clients across diverse industries such as real estate, travel, and e-commerce. His expertise includes playing a role in drafting VAT rules in the GCC, and he previously led VAT practices at both EY and Deloitte. This extensive and specialized background positions him as an exceptional authority on tax matters.
- Peter Wilson, Partner at Herminius Holdings Ltd
- Specializing in corporate advisory, geopolitical risk, and impact investing as a partner, Peter Wilson has had a diverse career – co-founding Libra Advisory Group, which focused on economic development in post-conflict nations; directing government reform programs for [Kofi Annan]; experience in diplomatic service; and a background at McKinsey. He is also the co-author of Make Poverty Business, a book advocating for private sector engagement in developing countries.
- Gaurav Sethia, Managing Director at Bank of Singapore, Asia’s Global Private Bank
- Gaurav Sethia serves as Managing Director at Bank of Singapore, based in DIFC, where he oversees the Middle East and India markets. Gaurav possesses a strong foundation in private banking, built through experience in both India and the Middle East. His professional history includes senior roles at Edmond de Rothschild, UBP, and Bank Muscat, and he previously worked within the private banking division of HSBC in Mumbai.
- Moderated by Nigel Sillitoe, CEO of Insight Discovery
Following the unpredictable first 100 days of the Trump administration, what are the pros and cons of tariffs.
- Compare current US tariffs (around 20.5%) to the 1930s policy that raised tariffs significantly (5% to 20%). The historical example led to severe economic damage, including retaliation, a 60% drop in US exports, high unemployment, and global economic decline. Repeating similar protectionism today could trigger a severe global economic crisis due to interconnectedness, especially highlighting the risks of a US-China conflict.
- There are valid points behind Trump’s appeal, including stagnant wages for unskilled workers, geostrategic competition with China, and trade-fuelled inequality harming workers (as economic theory predicts). However, this real problem, not fully acknowledged by some economists, fuelled political difficulties.
What are the primary economic objectives behind the current wave of tariffs and are they being achieved?
- Trump’s sudden, broad tariffs shocked a world used to globalization, causing global uncertainty and instability. This led to a pause and a shift towards bilateral talks. Countries are now focused on managing uncertainty and promoting self-sufficiency, pausing the benefits of globalization, though the long-term outlook is expected to improve.
- Analysing U.S. trade policy is difficult because its goals are unclear and officials have conflicting objectives (like using tariffs strategically vs. protecting domestic industry vs. raising revenue), making its direction uncertain.
Who might be the winners and losers domestically and internationally?
- Press coverage that the Middle East/UAE will benefit from trade shifts is likely inaccurate. The US strategy targets intermediaries more heavily than target countries (like Vietnam vs. China tariffs), putting the UAE at risk if it becomes a hub. Extreme tariffs are “noise” for negotiation; the real “signal” is that the US wants to raise its low average tariff for revenue. A moderate increase (around 5%) is likely the beneficial goal; higher tariffs would cause significant harm.
- US policy on global competition has harmed workers and damaged its reputation by imposing tariffs on both adversaries (China) and allies, a strategy seen as confusing and ultimately detrimental to the US, despite some domestic benefits.
- The US dollar is weakening (losing), benefiting other currencies (like the pound, euro) and non-dollar economies as investors avoid dollar assets due to US uncertainty.
What can you do immediately to minimise the impact of tariffs in the short term?
- Businesses neglected customs preparedness when tariffs were low, leaving them unprepared for recent increases and lacking supply chain visibility. They must now map supply chains, understand costs, and explore mitigation strategies (like First Sale rule, classification, origin optimization, legal claims) to navigate the challenging new tariff landscape.
What should Middle Eastern leaders prioritize to strengthen strategic autonomy amongst growing global economic fragmentation?
- Regional economic fragmentation hinders growth. Deep integration (monetary union, open borders, free movement) is needed for growth, global influence, and potentially expanding the bloc, but progress has been slow.
Can intra-regional trade in the Middle East be a buffer against global trade volatility, or is the region too fragmented to offer any real protection?
- Regional trade risks are known and manageable due to experience, driving expected growth. Global trade risks are higher, especially in complex supply chains. Unpredictable political and policy risks in some export markets (like the US example) are volatile and less attractive than regional trade.
What are the obstacles for the GCC to breakthrough the huge manufacturing gap?
- The biggest challenge for GCC manufacturing is the lack of a unified regional market. Manufacturing needs large markets to be competitive, and individual countries struggle alone. Success requires a unified GCC strategy with open borders, not just separate national plans.
Is there a significant rise in stressed companies, in the US and GCC requiring strategic planning and investment adjustments?
- An impact is anticipated, notably in margin-pressured sectors like retail. While the GCC should be relatively insulated with minimal collateral damage, the impact is strongly expected, particularly in Europe.
How will an expanding GCC/Middle East trade bloc impact and potentially strengthen the BRICS alignment?
- BRICS is not a unified rival bloc like the Soviet Union. It’s a diverse forum for common interests but lacks policy alignment and internal unity, making unified action against major powers unlikely currently. It’s more of a discussion group than a cohesive threat.
- Countries are increasingly trading in non-dollar currencies (their own) to reduce dependence on the dollar, a growing long-term trend.
What the impact tariffs will have on the UAE and where the opportunities might be?
- ECI helps UAE exporters navigate increased risks in today’s unpredictable global trade. It highlights the UAE’s strategy of diversification and partnerships (like CEPAs) facilitating significant trade growth (AED 5 trillion). Success depends on managing policy shifts, focusing on ‘Made in UAE’ value addition leveraging strong infrastructure, and proactive risk management.
- The UAE is investing $1.3-1.4 trillion in the US, signalling a strong partnership and rejecting intermediary status. This includes establishing manufacturing in the US, aligning with both countries’ goals (US domestic production, UAE strategic aims). Analysing this against US objectives, the revenue and reshoring are partially met, but reducing China’s influence is unlikely. The investment is a clear signal of commitment from the UAE.
Which UAE sectors are best positioned to benefit from trade diversion? And how can businesses scale to meet new market demand?
- The UAE’s tariff advantage is attracting foreign companies to establish manufacturing and assembly hubs for re-exporting goods and benefiting from favourable tariffs abroad, strengthening both their market access and the UAE’s position as a re-export hub. This is a significant current opportunity.
- Significant growth is evident in manufacturing, renewable energy, and technology. This expansion is supported by substantial investment in relevant projects, aimed at meeting the global demand for these technologies.
What is the minimum local production percentage needed to export our product to the US and qualify it as ‘locally made’?
- Lower UAE tariffs encourage local manufacturing and value addition, not just simple import/re-export. To qualify for lower rates, businesses should focus on substantive activities like manufacturing.
What is the UAE’s position in the trade war in relation to the USA?
- The US has a large $19.5 billion trade surplus with the UAE and the UAE is actively supporting its manufacturers to achieve genuine exports to the US market, focusing on building real businesses and logistics networks, prioritising this over acting purely as a re-export intermediary, to strengthen its global export hub role.
Do you see future trade wars shifting from goods to digital services?
- Many nations are targeting US tech companies (like with digital taxes). Since the US primarily exports services, other countries have leverage to restrict these service exports (like banking, digital). While currently avoided, even minor shifts could trigger such restrictions, dramatically escalating trade conflict and significantly harming the US.
Where will we observe the major acceleration of talent and investment?
- In the next 5-10 years, the US will mostly retain its talent as decline is slow. However, its reaction during this medium term is crucial: a good response will ensure long-term competitiveness, while a poor one could lead to significant future talent loss.
What are the consequences for financial markets given current instability, and will markets become more fragmented or move towards unification and stability?
- Great power competition, especially Western concern over China’s rise, is driving fundamental, long-term global economic shifts and increasing geopolitical risks. This is forcing strategic supply chain diversification away from vulnerable sources like China, a major trend expected to outweigh short-term trade deals and benefit regions diversifying supply.
Could we be underestimating the United States in using military and tech dominance to increase US influence?
- The US is ignoring its significant strengths (economy, tech, military) to focus narrowly on issues like the trade deficit. China is reluctant to negotiate because it sees US domestic companies hurt by and lobbying against the tariffs, effectively resolving the issue for China without needing its direct involvement.
What is the outlook and to what extent can the tariff impact be curtailed?
- The outlook for trade tensions is uncertain (50/50). There’s fear of escalating trade wars, but the key is where tariffs finally stabilize. A moderate level (~4-5%) would be acceptable, while a high level (>5-6%) would cause global problems and increased protectionism.
There is an emergence of “minilateral organizations” (like China-SK-Japan talks) across recent US administrations. Will trade wars increase these and impact dollar vs. non-dollar trade?
- US protectionism under Trump paradoxically serves as a cautionary tale, pushing other nations to reject similar policies and instead seek alternative global trade partnerships and regional blocs, thus shifting global trade dynamics.
- Capital is shifting away from US Treasuries into assets like gold and digital assets, causing volatility in currencies like the Euro and Pound. This signals a major global financial shift away from the dollar, compelling even dollar-pegged economies like Saudi Arabia to diversify.
What are the long-term (10-20 years) economic and global production adjustments needed as Millennials and Gen Z are expected to become less materialistic consumers with different priorities?
- The US trade war primarily hurts US consumers and businesses via higher prices, as restrictions are US-only. This policy is unlikely to cause global fragmentation unless other countries retaliate (which is deemed less likely) and is expected to succumb to US domestic pressure.
What are the chances we’re heading towards recession, depression and even a military clash?
- Instead of an immediate recession, a stagflation is expected, primarily due to business uncertainty. A recession could potentially follow if this stagflation continues.
- A significant risk of military conflict does exist, as indicated by US briefings on fighting China. Wars often begin due to miscalculations and accidents, highlighting a substantial danger of miscalculation with China potentially leading to conflict.
Could the current “American trade war” escalate into a more complex “global trade war.”
- A global trade war is possible, but years away, and contingent on the next presidency. If the next president continues the current path, then yes. If they make a major shift, like Roosevelt after Hoover, then no.
- No, this primarily an American problem, not a global one. Addressing it requires significantly diversifying supply sources to avoid inadvertent reliance on any single country or supplier.
- Perceived shifts in US values and declining trust are causing traditional allies to re-evaluate ties and seek new alignments, potentially leading to increased global cooperation among other nations, possibly consolidating against the US.