New Tariffs: Global Challenges and Opportunities for the UAE Economy

In a move that has sent shockwaves through the global economic landscape, U.S. announced on April 2, 2025, a sweeping tariff policy aimed at rectifying trade imbalances and asserting economic sovereignty. The centrepiece of this policy is a universal 10% tariff on all imports to the United States, with even steeper tariffs for certain countries deemed to have excessive trade surpluses with the U.S. , such as China with 34% tariff increase. The United Arab Emirates (UAE) is among the nations affected by these new tariffs, facing a flat 10% duty on its exports to the American market.

The average U.S. tariff rate is expected to surge to levels not seen since the early 20th century, hovering around 22%.

Global Economic Implications

The tariffs mark a significant pivot toward protectionism in U.S. trade policy. Economists and financial institutions have voiced concerns about the likely repercussions: increased prices for U.S. consumers, inflationary pressures, and the possibility of retaliatory measures from affected trade partners.

The spread of trade protectionism will have profound effects on global economic performance, as trade growth rates are expected to decline, and then economic growth rates in all countries will decline, which may lead to a deterioration in development rates and the level of global economic well-being.

Impact on the UAE Economy

The UAE, as a key trading nation with diversified global ties, faces immediate challenges but also potential opportunities in the wake of these tariffs. A 10% tariff on UAE exports to the U.S. could affect competitiveness, especially for sectors with significant U.S. exposure such as aluminium, petrochemicals, and high-value manufacturing.

However, the UAE is not standing still. It has proactively built a robust international trade framework through its Comprehensive Economic Partnership Agreements (CEPAs). As of March 2025, the UAE has signed 26 CEPA deals with countries across Asia, Africa, and Europe, aiming to simplify customs procedures, eliminate tariffs, and facilitate better market access. This broad trade diversification is a key buffer against overreliance on the U.S. market.

How the UAE and Its Businesses Can Benefit

While the tariff hikes are generally seen as a global economic headwind, the UAE business ecosystem can extract several strategic advantages:

• Trade Diversification: By leveraging its CEPA network and Gulf Cooperation Council (GCC) ties, the UAE can deepen trade relations with Asia, Africa, and Latin America, where demand is growing and trade barriers are falling.

• Attracting Foreign Investment: The UAE’s stable business environment, liberal trade policies, and strategic geographic location make it an attractive hub for investors seeking to bypass U.S.-linked trade disruptions.

• Innovation and Value-Added Manufacturing: UAE companies, especially SMEs, are increasingly shifting toward high-value goods and services. By focusing on quality, branding, and technology, they can reduce dependence on low-cost export models and become less vulnerable to tariffs.

• Utilizing Free Zones: The UAE’s Free Trade Zones offer tax exemptions and simplified logistics, providing SMEs with a competitive edge in regional and international trade.

While new tariffs introduce uncertainty into global markets, the UAE is well-positioned to weather the storm and potentially thrive. Abu Dhabi’s SMEs, backed by supportive legislation and a forward-looking trade agenda, can capitalize on this shift by diversifying markets, enhancing innovation, and leveraging government support. By remaining agile and strategic, the UAE can transform this global trade disruption into an opportunity for long-term economic resilience and growth.