Introduction:
U.S. tariffs will affect Middle Eastern exports by increasing the cost of goods, thereby reducing competitiveness in the American market. However, the overall impact is generally limited, as the Middle East primarily exports oil and petroleum products, which typically face minimal tariffs or are exempt due to strategic and economic interests.
Key Points on Tariffs and Middle East Exports to the U.S.:
Dominance of Oil and Petroleum:
The Middle East predominantly exports oil, petroleum products, and petrochemicals to the U.S. (mainly Saudi Arabia, UAE, Kuwait, and Iraq). These commodities usually have low or zero tariff rates due to the strategic importance and global price stability concerns.
Non-Oil Exports and Tariffs:
Middle Eastern countries do export manufactured goods like textiles, clothing, aluminum, steel, and agricultural products to the U.S. These sectors may be affected by U.S. tariffs, particularly under trade policies aimed at protecting domestic producers.
For example, let's assume that the US exports Aluminum for 1.78$ billion with the new tariff it will be $1.958 billion, and that's only one product of exportation so of-course the us will try to minimize such exports so what will eventually happen to the countries that are reliant on these exports.
Manufacturing in the Middle East:
The Middle East has significant manufacturing sectors in several countries, notably:
- UAE: Aluminum, steel, chemicals, food processing, construction materials, and aerospace components.
- Saudi Arabia: Petrochemicals, plastics, aluminum, steel, pharmaceuticals, and food products.
- Turkey (though sometimes categorized separately): Textiles, automobiles, electronics, steel, and appliances.
- Egypt: Textiles, clothing, processed foods, chemicals, and pharmaceuticals.
MENA Region countries can opt-in for a strong strategy here which is:
Outsourcing as a Protective Strategy:
One way businesses in the MENA region can reduce their vulnerability to tariffs is by focusing on service-based exports rather than physical goods. Outsourcing services like IT support, customer service, software development, and financial services are not subject to tariffs, as they are digitally delivered.
For example,Here are two prominent outsourcing companies that operate in the MENA Region: Edge Outsourcing leads in Talent Solutions and Payroll Services, Also Target HR excels in human resources outsourcing, both benefiting from the region's growing expertise and competitive edge.
Impact of Tariffs:
U.S. tariffs can discourage Middle Eastern exporters by reducing competitiveness compared to suppliers from countries with trade agreements or lower tariff rates.
However, given the relatively small share of manufactured goods from the Middle East compared to oil exports, the overall economic impact of tariffs on these economies is moderate, though still meaningful for individual industries.
Trade Agreements and Mitigation:
Some Middle Eastern countries (like Jordan, Israel, Morocco, Bahrain, and Oman) have Free Trade Agreements (FTAs) with the U.S, allowing duty-free access for many products and thus protecting them from tariffs. Countries without such agreements (like Egypt or Saudi Arabia) may see tariffs more significantly impacting their non-oil sectors. So those countries have to be flexible and open to change and opt-in for strategies that will compensate for the tariff cuts in other ways.
Conclusion:
Therefore, it’s important for MENA countries to not only rely on traditional import and export of physical goods, but also to expand into exporting expertise and services across sectors like technology, finance, and customer support. By doing so, the region can diversify its trade portfolio, reduce vulnerability to tariffs, and position itself more competitively in the global digital economy.Tariffs will certainly affect Middle Eastern manufactured goods entering the U.S., the region's primary exports (oil and petroleum) largely remain unaffected. Be sure to look up your opportunities with Edge Outsourcing and check its services alongside its peer Target HR.
