Navigating the chaos: How GCC’s trade war survival plan could take shape

Navigating the chaos: How GCC’s trade war survival plan could take shape
While the GCC countries were spared the harshest penalties, the ripple effects pose indirect risks to the region’s economic outlook. Shutterstock
Short Url
Updated 11 April 2025
Follow

Navigating the chaos: How GCC’s trade war survival plan could take shape

Navigating the chaos: How GCC’s trade war survival plan could take shape
  • GCC economies have built a notable buffer against immediate shocks through a decade of reforms, fiscal discipline and diversification efforts.
  • The region faces mounting long-term challenges that could erode economic resilience.

RIYADH: The Gulf bloc must fast-track diversification, strengthen regional integration and deepen global ties in Asia, Africa and Latin America to cushion against the long-term impact of newly imposed US tariffs, a top risk strategist has told Arab News.

Mohammad Fheili warned that while the Gulf region has the capacity to withstand short-term turbulence, it remains exposed to the deeper ripple effects of a shifting and increasingly fragmented global trade environment.

President Donald Trump’s sweeping tariffs triggered a new wave of global trade tensions, sending financial markets into a tailspin and prompting urgent diplomatic responses.

With a baseline 10 percent tariff imposed on all imports and a staggering 125 percent levy on Chinese goods, the policy aims to combat what Trump calls unfair trade practices and to revive American manufacturing.

Key US trade partners, including the EU, Japan and South Korea, were also hit with elevated tariffs, drawing strong rebukes and pushing some nations to the negotiating table in hopes of exemptions or revised terms.

“If the region is to shield itself from the long-term consequences of Trump’s trade war, it must take decisive steps — starting now,” Fheili, who also works as an economist, told Arab News.

To avoid long-term vulnerabilities, he urged policymakers across the region to adopt a proactive, multi-pronged strategy.

This includes expanding partnerships beyond Asia to emerging markets in Africa and Latin America, strengthening intra-Gulf Cooperation Council economic integration, and boosting domestic demand by investing in wage growth, labor reforms and support for small and medium-sized enterprises.

“Strategic patience, economic flexibility and deeper regional integration will be essential to navigating what lies ahead,” Fheili said.

These measures, he noted, were essential in transforming the GCC from a strategically positioned bloc into a globally competitive economic force.

The market reaction to Trump’s tariff announcement was swift and severe: US indices plunged, with the S&P 500 falling nearly 10 percent in the first two days, while global exchanges echoed the selloff amid fears of a prolonged economic downturn.

“US markets initially spiked after hours following the tariff announcement on April 2, but the rally lasted only minutes before a sharp reversal sent markets tumbling,” Makram Makarem, senior director at Investment and Capital Bank, told Arab News.

“By the close on April 3, US indices were down by around 5 percent. The following day brought more turmoil, as China’s retaliatory measures triggered an additional 6 percent drop,” he added.

“After some breathing room on April 7 and into the morning of April 8, markets staged a modest rebound. But later that afternoon, Trump’s announcement of even higher tariffs on China triggered another wave of selling — though losses remained above Monday’s lows,” Makarem said.

Trump later introduced a 90-day pause on most global tariffs but simultaneously hiked levies on Chinese goods to 125 percent.

“Markets reacted positively to the pause, with the S&P 500 surging 9.5 percent as investors welcomed the temporary relief despite rising friction with China,” Makarem said.

Trump has insisted the tariffs could become permanent unless trade imbalances are corrected, casting a long shadow over global supply chains and export-driven economies.

While the GCC countries were spared the harshest penalties, the ripple effects — especially through weakened global oil demand and investor caution — pose indirect risks to the region’s economic outlook.

“While the GCC has so far managed to stay out of the direct line of fire, it cannot avoid the indirect exposure to global economic turbulence,” according to Fheili.

“In the short term, GCC states may be able to absorb the initial shockwaves. But if this trade war persists, the structural weaknesses of the region’s economies will be tested — and possibly exposed,” he said.

Short-term resilience

GCC economies have built a notable buffer against immediate shocks through a decade of reforms, fiscal discipline and diversification efforts.

National strategies such as Saudi Arabia’s Vision 2030 and the UAE’s economic transformation agenda have laid the groundwork for expanding non-oil sectors such as tourism, logistics and financial services.

The region has also strengthened trade ties beyond traditional partners, deepening economic relationships with fast-growing markets in Asia and Africa. Sovereign wealth funds and robust central banking systems further support macroeconomic stability.

Moreover, President Trump’s recent tariff policy notably spares oil and gas imports — offering near-term relief for the GCC’s energy-dependent economies and preserving their most critical revenue stream amid rising global uncertainty.

“Countries like Saudi Arabia, the UAE and Kuwait have built significant reserves through sovereign wealth funds, providing liquidity and investment continuity even during global slowdowns,” said Fheili.

Turning to Saudi Arabia, the analyst said that the Kingdom is well-positioned to benefit from shifting global dynamics.

“In a fragmented trade environment, energy security becomes even more critical. Saudi Arabia’s vast oil and LNG resources remain attractive to countries seeking reliable long-term partners, potentially locking in stable export relationships,” he said.

Long-term trade turbulence requires structural overhaul

As the global trade environment shifts toward deeper fragmentation, the GCC faces mounting long-term challenges that could erode the region’s economic resilience.

While the initial shock of US tariffs may spare the GCC from direct impact, Fheili warns that prolonged trade conflict poses far-reaching risks — especially for nations still reliant on hydrocarbon exports and global capital flows.

Indeed, weakening global industrial output could shrink demand for petrochemical exports, a major revenue stream for Saudi Arabia and Qatar. Tightened US export controls may also complicate technological and defense cooperation with American firms, further entrenching strategic vulnerabilities, according to the expert.

Despite visionary plans such as Saudi Vision 2030, many structural weaknesses persist.

“Diversification is still in its early stages,” Fheili said. He added: “The non-oil economy, while growing, isn’t yet mature enough to offset a drawn-out global slowdown.”

The region’s reliance on imports — from food to industrial equipment — adds another layer of exposure. If global supply chains continue to strain, the GCC could face inflationary pressures and shortages.

Additionally, China, the Gulf’s largest oil customer, remains deeply entangled in the trade war crossfire. A slowdown in Chinese energy demand would reverberate across the Gulf’s public finances, Fheili said.

Fiscal disparities across the bloc could also widen the gap between nations including Saudi Arabia and the UAE — armed with sovereign wealth reserves — and more vulnerable economies such as Bahrain and Oman. Meanwhile, intra-GCC trade remains modest, limited by overlapping sectors and weak integration.

“A more connected and cooperative Gulf economic bloc could serve as a buffer against global headwinds,” said Fheili, adding: “The time is ripe to turn the GCC from a strategic alliance into a true economic force.”

Strengthening domestic demand and supporting small and medium enterprises will also be crucial in buffering external shocks. Furthermore, leveraging strategic assets — such as gold reserves, energy logistics and emerging green technologies — can provide the GCC with an edge in a shifting global order.

According to Fheili, one of the most underused tools may be gold. In the Gulf, it is more than a hedge — it is heritage, trade and untapped financial strategy. As global faith in fiat currencies wavers, GCC central banks can treat gold not just as a stabilizer, but a strategic asset that reinforces financial sovereignty and hedges against geopolitical volatility.

“Resilience must evolve from a cushion into a capability,” he added.


Saudi Arabia leads MENA startup funding in April with $158.5m  

Saudi Arabia leads MENA startup funding in April with $158.5m  
Updated 05 May 2025
Follow

Saudi Arabia leads MENA startup funding in April with $158.5m  

Saudi Arabia leads MENA startup funding in April with $158.5m  

RIYADH: Saudi Arabia led startup funding across the Middle East and North Africa in April 2025, attracting $158.5 million across eight deals — accounting for more than two-thirds of the region’s total investment for the month. 

The Kingdom’s dominant performance was largely driven by iMENA Group’s $135 million pre-initial public offering round, placing it ahead of the UAE, which followed with $62 million raised across nine startups. 

In total, MENA startups secured $228.4 million in April through 26 deals, marking a 105 percent increase from March and nearly triple the amount raised in April 2024, according to Wamda’s monthly report.  

Notably, the month’s funding activity featured no debt financing.

“Interestingly, the absence of debt-financed deals in April highlights growing investor confidence in equity-based funding — a trend reflecting a healthier capital environment,” the report stated.  

Morocco ranked third regionally, raising $4 million across two startups, while Egypt lagged behind with just $1.5 million secured by four companies. 

Early-stage ventures led in deal volume, bringing in $49 million through 20 transactions. Late-stage activity was concentrated entirely in iMENA’s pre-IPO round. 

By sector, fintech remained the top draw for investors, attracting $44 million across seven transactions. Traveltech also gained momentum, driven by HRA Experience’s deal, while e-commerce startups raised $2.5 million across three deals. 

Software-as-a-service ventures made a comeback after a quiet first quarter, securing $1.8 million from three transactions.  

In terms of business models, business-to-business startups dominated, raising $180 million across 12 deals.  

Business-to-consumer ventures followed with $43 million from seven transactions, while six companies operating both B2B and B2C models accounted for the rest of the disclosed funding. 

Gender disparities in startup funding persisted in April. Female-led startups secured less than $500,000 in total, while male-founded ventures captured 97 percent of all disclosed capital. Startups co-founded by men and women raised an additional $6.5 million. 


Closing Bell: Saudi main index closes in green at 11,422 

Closing Bell: Saudi main index closes in green at 11,422 
Updated 05 May 2025
Follow

Closing Bell: Saudi main index closes in green at 11,422 

Closing Bell: Saudi main index closes in green at 11,422 

RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Monday, gaining 11.45 points, or 0.10 percent, to close at 11,422.95. 

The total trading turnover of the benchmark index was SR5.21 billion ($1.39 billion), as 153 stocks advanced, while 84 retreated. 

The Kingdom’s parallel market, Nomu, also rose, gaining 129.67 points, or 0.46 percent, to close at 28,142.99. This comes as 41 of the listed stocks advanced, while 33 retreated. 

The MSCI Tadawul Index increased by 4.27 points, or 0.29 percent, to close at 1,455.44. 

The best-performing stock was Mouwasat Medical Services Co., with its share price surging 9.97 percent to SR78.30. 

Other top performers included Fawaz Abdulaziz Alhokair Co., which saw its share price rise 9.92 percent to SR14.18, and Saudi Reinsurance Co., which posted a 9.71 percent gain to reach SR53.10. 

Umm Al Qura for Development and Construction Co. recorded the day’s steepest decline, with its share price slipping 3.47 percent to SR25.05.   

Sahara International Petrochemical Co. and Saudi Steel Pipe Co. also saw declines, with their shares dropping by 2.82 percent and 2.58 percent to SR17.90 and SR52.90, respectively.   

On the announcements front, Ades Holding Co. reported interim financial results for the first three months of the year, posting a net profit of SR196.6 million — a 6.3 percent decline compared to the previous quarter. It said that the drop in net profit reflects an increased ratio of depreciation and tax costs to revenue in this period.   

The company’s total comprehensive income saw a 45.7 percent quarter-on-quarter decrease in the first quarter of 2025 to reach SR170.8 million.  

Ades Holding Co.’s share price traded 0.94 percent lower on the main market during today’s session to reach SR14.78.   

In another announcement, Makkah Construction and Development Co. reported a 32.7 percent year-on-year increase in net profit for the same period, reaching SR150 million.   

The company credited the growth to higher revenues from the hotel and towers this quarter, driven by the inclusion of the last nine days of Ramadan, increased mall revenues, and gains from financial assets classified at fair value through profit or loss.   

Similarly, the company’s total comprehensive income rose to SR758 during the quarter, up from SR576 last year.   

The MCDC’s share price traded 1.5 percent higher to reach SR108.20. 


Saudi Arabia posts $15.6bn budget deficit in Q1 with resilient non-oil growth

Saudi Arabia posts $15.6bn budget deficit in Q1 with resilient non-oil growth
Updated 05 May 2025
Follow

Saudi Arabia posts $15.6bn budget deficit in Q1 with resilient non-oil growth

Saudi Arabia posts $15.6bn budget deficit in Q1 with resilient non-oil growth

RIYADH: Saudi Arabia recorded a deficit of SR58.7 billion ($15.65 billion) in the first quarter of 2025, driven by declining oil revenues and increased spending to support Vision 2030 development initiatives, according to the Finance Ministry.

According to the quarterly budget performance report, total revenues reached SR263.61 billion, marking a 10.16 percent decline compared to the same period last year.

The drop is primarily attributed to reduced oil revenues, which fell 17.65 percent year on year to SR149.81 billion, driven by ongoing OPEC+ production cuts that curbed export volumes despite relatively steady global oil prices.

Oil income accounted for 56 percent of total government revenues, down from 62 percent in Q1 2024.

In contrast, non-oil revenues continued to grow modestly, rising 2.06 percent to SR113.81 billion, underpinned by structural economic reforms and the Kingdom’s diversification agenda under Vision 2030.

Taxation on goods and services remained the largest contributor to non-oil income, generating SR71.56 billion—up 2.37 percent year on year. Other non-oil revenue sources, including fees and investment returns, added SR25.41 billion, making up 22.3 percent of the non-oil total.

Total government expenditures in the quarter rose 5.39 percent year on year to SR322.32 billion. The increase reflects Saudi Arabia’s continued investment in strategic initiatives and priority development projects aligned with Vision 2030 goals.

Compensation for government employees remained the largest expenditure category, totaling SR146.09 billion—an annual increase of 6.24 percent—and accounting for 45.3 percent of total spending.

Expenditures on goods and services amounted to SR64.63 billion, or 20 percent of the quarterly total, while capital spending represented 8.6 percent. Other operational costs comprised 10.6 percent.

The first quarter deficit was entirely financed through debt instruments, pushing Saudi Arabia’s total public debt to SR1.33 trillion—up 19.08 percent from a year earlier.

Of this, 60 percent was sourced domestically, with the remainder attributed to external borrowing, in line with the Kingdom’s debt diversification strategy.

Despite the fiscal shortfall, the ministry noted that the quarterly figures remain consistent with the government’s 2025 budget plan. Revenues in the first quarter represent 22.3 percent of the full-year target, while expenditures account for 25 percent of the planned annual spend.

Looking ahead, Saudi Arabia’s fiscal outlook may receive a boost from higher oil output. OPEC+ recently announced plans to accelerate the unwinding of prior production cuts, including a June increase of 411,000 barrels per day. Combined with earlier boosts in April and May, the group plans to restore a total of 960,000 barrels per day—reversing 44 percent of the 2.2 million bpd reduction agreed upon in December 2024.


Saudi Aramco raises June oil prices for Asian markets

Saudi Aramco raises June oil prices for Asian markets
Updated 05 May 2025
Follow

Saudi Aramco raises June oil prices for Asian markets

Saudi Aramco raises June oil prices for Asian markets

RIYADH: Saudi Aramco has increased its official selling price for crude oil destined for Asia in June, ending a two-month streak of price cuts, the company confirmed in an official statement on Sunday.

The state-owned oil giant raised the price of its benchmark Arab Light crude by $0.20, setting it at $1.40 per barrel above the average of Oman and Dubai crude prices.

The adjustment comes despite persistent downward pressure on global oil markets due to concerns over rising supply and a fragile demand outlook.

The move follows Saturday’s announcement from the OPEC+ alliance, which agreed to boost oil production for a second consecutive month. The group, which includes both OPEC members and key allies like Russia, plans to increase output by 411,000 barrels per day in June.

Market observers are now closely watching the outcome of the next OPEC+ meeting, scheduled for May 5, which will further clarify the group’s production strategy heading into summer.

Saudi Aramco prices its crude oil across five density-based grades: Super Light (greater than 40), Arab Extra Light (36-40), Arab Light (32-36), Arab Medium (29-32), and Arab Heavy (below 29).

The company’s monthly pricing decisions impact the cost of around 9 million barrels per day of crude exported to Asia and serve as a pricing benchmark for other major regional producers, including Iran, Kuwait, and Iraq.

In the North American market, Aramco set the May OSP for Arab Light at $3.40 per barrel above the Argus Sour Crude Index.

Aramco determines its OSPs based on market feedback from refiners and an evaluation of crude oil value changes over the past month, taking into account yields and product prices.


UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global
Updated 05 May 2025
Follow

UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

RIYADH: The non-oil private sectors of the UAE, Kuwait, and Qatar continued their expansion in April, supported by strong demand, improving output, and stable employment conditions, according to the latest Purchasing Managers’ Index surveys released by S&P Global.

In the UAE, the headline PMI held steady at 54 for a second consecutive month, reflecting continued momentum in the country’s non-oil economy. While output growth eased to a seven-month low, firms ramped up hiring at the fastest rate in nearly a year to manage capacity pressures. New orders surged, underpinned by the strongest international demand in five months.

This robust performance aligns with a wider regional trend of economic diversification, as Gulf nations—including Saudi Arabia—work to reduce their long-standing reliance on oil revenues.

“The April PMI results signaled a notable uptick in hiring activity across the non-oil private sector,” said David Owen, senior economist at S&P Global Market Intelligence.

“After several months of mild increases in payroll numbers, despite robust sales growth, job creation rose to its highest level in 11 months.”

Owen noted that the hiring push was largely aimed at easing backlogs, which, while still rising, did so at the slowest pace in six months. “That said, employment growth was still modest overall, adding to suggestions that some firms may be struggling to recruit,” he added.

Any PMI reading above 50 indicates expansion in the non-oil private sector, while a figure below 50 denotes contraction.

Business confidence in the UAE climbed to its highest level so far in 2025, as firms cited strong demand pipelines and positive expectations. Input purchases rose again in April, though at a slower pace than March, which had marked a 68-month high.

“Firms are hopeful that elevated demand levels and strong pipelines, as characterized by steeply rising backlogs, should propel activity higher in the coming months,” Owen said.

Despite increased purchasing and faster supplier delivery times, stock levels remained largely unchanged for the second consecutive month. Business optimism also rose for the third straight month in April.

In Dubai, operating conditions in the non-oil private sector improved at a slower pace due to weaker growth in new business inflows. Nonetheless, order books continued to expand sharply, driving strong overall business activity. Employment rebounded in April after a brief dip in March, as companies aimed to boost capacity. However, firms in Dubai expressed subdued confidence about future activity, with sentiment among the lowest on record.

Kuwait sees strongest output

Kuwait's non-oil private sector saw significant gains in April, with the country’s PMI rising to 54.2 from 52.3 in March—marking one of the sharpest expansions on record since the survey began in 2018.

“It was a bumper start to the second quarter of 2025 for non-oil companies in Kuwait, with a further influx of new orders leading companies to expand output at one of the sharpest rates since the survey began,” said Andrew Harker, economics director at S&P Global Market Intelligence.

The expansion was driven by robust new order growth, supported by competitive pricing and strategic marketing efforts. However, firms faced rising input costs that made it harder to maintain price stability.

While employment rose only marginally, the minimal hiring contributed to a further buildup in outstanding work.

“It remains to be seen, however, whether firms will be able to keep restricting selling prices in a scenario where input costs are rising sharply,” Harker noted. “The coming months will illustrate the extent to which companies are happy to see margins come under pressure in order to keep orders flowing in.”

Kuwaiti firms also reported a notable increase in export orders. Optimism about future output remained high, supported by competitive strategies, product development, and marketing.

Qatar growth slows slightly

Qatar’s non-oil sector saw a slight dip in overall momentum in April, with its PMI falling to 50.7 from 52 in March. Despite the decline, the index stayed above the neutral 50 mark for the 16th consecutive month, reflecting continued—if slower—growth.

Output among Qatari non-energy firms rose for the first time in 2025, but the sector faced a drop in new business and a cooling labor market.

“The PMI indicated continuing growth of the non-energy private sector economy at the start of the second quarter, but there was a loss of momentum owing mainly to a renewed reduction in new business and slower employment growth,” said Trevor Balchin, economics director at S&P Global Market Intelligence.

“The latest figure of 50.7 was the lowest in three months and below the long-run trend level of 52.3, as weaker demand offset an increase in total output.”

Growth was led by the manufacturing, services, and wholesale and retail sectors, while construction activity remained weak despite signs of stabilization.

Job creation remained positive across sectors, although April saw the slowest employment growth since August 2024.

“The employment component remained elevated in April, indicating further strong jobs growth. That said, there was evidence that the recent labor market boom was easing, with the rate of job creation down at an eight-month low,” Balchin said.

Wage growth also slowed to a five-month low but remained among the strongest since the survey’s inception in 2017.

Looking ahead, Qatari businesses maintained optimism for the year ahead, citing growth in real estate, infrastructure development, tourism, and a rising expatriate population as key drivers.