Oil-rich Gulf risks faces collateral damage in Trump trade war

A Pennsylvania steelworker checks the temperature of molten metal in a furnace. US President Trump’s move to introduce tariffs on steel imports has triggered a global backlash and led to fears that a trade war could hurt Gulf economies. (AFP)
Updated 11 March 2018
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Oil-rich Gulf risks faces collateral damage in Trump trade war

LONDON: Gulf countries will not be able to fully escape the impact of any global trade wars that could break out following US President Donald Trump move to impose tariffs on steel and aluminum imports, said analysts.

Despite the region’s oil wealth and unlikelihood that any tariffs would be imposed on energy imports from the Gulf, the GCC remains vulnerable to any widespread economic downturn, said Monica de Bolle, senior fellow at the Peterson Institute for International Economics based in Washington DC.

“Because of oil, things are somewhat protected, at least a little more than rest of world. But that is not to say the region would escape from the basic harm done to global economy as a whole,” she told Arab News, referring to the potentially damaging effects of a rise in protectionism.

Beyond oil, the region is an important location for the trans-shipment of goods, with millions of tons of freight passing through ports such as Jebel Ali in Dubai and Jeddah in Saudi Arabia.

Trump announced on March 1 that he would impose tariffs of 25 percent on imports of steel and 10 percent on aluminum imports. The president said that the tariffs would counter the cheaper metals coming into the US which he said were destroying the country’s domestic steel and aluminum industries. He later tweeted that “trade wars are good, and easy to win.”

The move has triggered fears of a global trade war with policymakers from Brussels to Beijing planning their response.

The EU has considered placing tariffs on the import of US goods, such as Harley-Davidson motorbikes or Levi’s jeans.

The tariffs have been strongly criticized by the International Monetary Fund (IMF) and the director-general of World Trade Organization (WTO), Roberto Azevedo, has warned that it could even plunge the world into a “deep recession.”

An official from China has said that it would take action if the tariffs started to hurt Chinese interests. Canada’s Prime Minister Justin Trudeau has spoken to Trump to express his “serious concern” about the tariffs, saying the move would “not be helpful” to concluding a deal on the North American Free Trade Agreement (NAFTA).

In the Gulf, countries that export a lot of aluminum, such as Bahrain, could be the most vulnerable to Trump’s tariffs, said Jason Tuvey, Middle East economist at Capital Economics.

But he told Arab News that the Gulf’s ‘strategic importance’ to the US could limit the impact.

“It’s quite easy to imagine a scenario where the Gulf countries manage to persuade the Trump administration to provide them with exemptions. In terms of a broader trade war, unless tariffs are extended to oil (which seems highly unlikely), there will not be a major impact on the Gulf economies,” he said.

De Bolle warns that despite the US’s strategic interests in the Gulf, it is hard to predict what the Trump administration will do next.

“There really isn’t any reason for the US to go after energy products … but who knows,” she said.

“This administration is clearly on a war path in terms of what they want to do with the trade deficit. They really want to see a reduction in the deficit.”

“Obviously this is making many people around the world nervous. I don’t think we can rule out a trade war, and then we have an unhinging of the global economy which affects everybody,” she said.


Palestinians in financial crisis after Israel, US moves

Updated 22 March 2019
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Palestinians in financial crisis after Israel, US moves

  • A Ramallah-based economics professor said the Palestinian economy more generally, remain totally controlled by and reliant on Israel
  • Israeli-Palestinian peace efforts have been at a standstill since 2014

RAMALLAH, Palestinian Territories: The Palestinian Authority faces a suffocating financial crisis after deep US aid cuts and an Israeli move to withhold tax transfers, sparking fears for the stability of the West Bank.
The authority, headed by President Mahmud Abbas, announced a package of emergency measures on March 10, including halving the salaries of many civil servants.
The United States has cut more than $500 million in Palestinian aid in the last year, though only a fraction of that went directly to the PA.
The PA has decided to refuse what little US aid remains on offer for fear of civil suits under new legislation passed by Congress.
Israel has also announced it intends to deduct around $10 million a month in taxes it collects for the PA in a dispute over payments to the families of prisoners in Israeli jails.
In response, Abbas has refused to receive any funds at all, labelling the Israeli reductions theft.
That will leave his government with a monthly shortfall of around $190 million for the length of the crisis.
The money makes up more than 50 percent of the PA’s monthly revenues, with other funds coming from local taxes and foreign aid.

While the impact of the cuts is still being assessed, analysts fear it could affect the stability of the occupied West Bank.
“If the economic situation remains so difficult and the PA is unable to pay salaries and provide services, in addition to continuing (Israeli) settlement expansion it will lead to an explosion,” political analyst Jihad Harb said.
Abbas cut off relations with the US administration after President Donald Trump declared the disputed city of Jerusalem Israel’s capital in December 2017.
The right-wing Israeli government, strongly backed by the US, has since sought to squeeze Abbas.
After a deadly anti-Israeli attack last month, Prime Minister Benjamin Netanyahu said he would withhold $138 million (123 million euros) in Palestinian revenues over the course of a year.
Israel collects around $190 million a month in customs duties levied on goods destined for Palestinian markets that transit through its ports, and then transfers the money to the PA.
Israel said the amount it intended to withhold was equal to what is paid by the PA to the families of prisoners, or prisoners themselves, jailed for attacks on Israelis last year.
Many Palestinians view prisoners and those killed while carrying out attacks as heroes of the fight against Israeli occupation.
Israel says the payments encourage further violence.
Abbas recently accused Netanyahu’s government of causing a “crippling economic crisis in the Palestinian Authority.”
The PA also said in January it would refuse all further US government aid for fear of lawsuits under new US legislation targeting alleged support for “terrorism.”

Finance Minister Shukri Bishara announced earlier this month he had been forced to “adopt an emergency budget that includes restricted austerity measures.”
Government employees paid over 2,000 shekels ($555) will receive only half their salaries until further notice.
Prisoner payments would continue in full, Bishara added.
Nasser Abdel Karim, a Ramallah-based economics professor, told AFP the PA, and the Palestinian economy more generally, remain totally controlled by and reliant on Israel.
The PA undertook similar financial measures in 2012 when Israel withheld taxes over Palestinian efforts to gain international recognition at the United Nations.
Abdel Karim said such crises are “repeated and disappear according to the development of the relationship between the Palestinian Authority and Israel or the countries that support (the PA).”
Israel occupied the Gaza Strip and the West Bank, including now annexed east Jerusalem in the Six-Day War of 1967 and Abbas’s government has only limited autonomy in West Bank towns and cities.
“The problem is the lack of cash,” economic journalist Jafar Sadaqa told AFP.
He said that while the PA had faced financial crises before, “this time is different because it comes as a cumulative result of political decisions taken by the United States.”
Abbas appointed longtime ally Mohammad Shtayyeh as prime minister on March 10 to head a new government to oversee the crisis.
Abdel Karim believes the crisis could worsen after an Israeli general election next month “if a more right-wing Israeli government wins.”
Netanyahu’s outgoing government is already regarded as the most right-wing in Israel’s history but on April 9 parties even further to the right have a realistic chance of winning seats in parliament for the first time.
Israeli-Palestinian peace efforts have been at a standstill since 2014, when a drive for a deal by the administration of President Barack Obama collapsed in the face of persistent Israeli settlement expansion in the West Bank.