Impact of the recent US Tariff Decisions on Middle East Businesses: What to do now? ​

In detail

On April 2, 2025, President Trump issued an Executive Order imposing a 10% customs duty on goods imported into the US from all countries, with duties up to 50% on imports from specific countries. The tariffs take effect on April 5, 2025, for all countries and April 9, 2025, for those specific countries with significant trade deficits with the US, disregarding existing Free Trade Agreements (FTAs), except for the United States–Mexico–Canada Agreement (USMCA). USMCA-compliant goods will continue to enjoy a 0% tariff rate, while non-compliant goods will face a 25% tariff. ​

This move, invoking a "national emergency" to protect American workers, leverages the International Emergency Economic Powers Act of 1977 (“IEEPA”), which gives the US President broad discretionary powers to address national economic emergencies. These tariffs will remain in force until the US President determines that the threat to US national security is addressed. ​

What is the impact on Middle East Countries? ​

Middle East countries, including the UAE, and KSA will be subject to additional tariff rate of 10%. They are not among those with which the US has a significant trade deficit. However, other Middle East and North Africa countries are more severely affected, e.g., Jordan (20%), Algeria (30%), Iraq (39%), Syria (41%), Libya (31%) and Tunisia (28%).  ​

The full list of countries that will face the announced reciprocal tariffs can be found in Annex I of the Executive Order. ​

For example, China will face an additional 34% tariff, while the EU will face a 20% tariff. Certain goods, such as copper, pharmaceuticals, semiconductors, and lumber, are exempt from these high reciprocal tariffs.​

It is important to bear in mind that, the US President is authorised, under the Executive Order, to increase these tariffs further in response to retaliatory measures taken by other countries. 

What is the 25% Tariff on Automobile Imports? ​

In addition to the reciprocal tariffs outlined above, on March 26, 2025, President Trump signed a Proclamation imposing a 25% customs duty on passenger vehicles, light trucks, and major automobile parts imported from all third countries, with a narrow exception for USMCA-compliant goods, which will also impact Middle East businesses engaged in this industry.​

What are the Additional Measures? ​

President Trump issued another Executive Order on April 2, 2025, eliminating the duty-free de minimis treatment for low-value shipments (valued at US$800 or less) imported from China. ​

​How are these measures related to the National Security Protection? ​

These measures, qualified by the US Administration as a "national emergency" to address threats to US national security and American workers and to guard against “unfair trade practices” in US trade relations, are part of a broader protectionist movement adopted by the US Administration. These decisions come after considering the final results of investigations conducted under the "America First Trade Policy Presidential Memorandum" and the "Reciprocal Trade and Tariffs Presidential Memorandum,” which we referred to in our previous analysis: Navigating the US Trade and Tariff Agenda: Strategic Recommendations for GCC Businesses. ​

​What is Compliance with International Obligations and Trade Stability? ​

It remains somewhat unclear whether these new measures comply with US tariff bindings (which are US commitments setting the maximum tariff rates that the US can impose on imports) and its international obligations, such as those under FTAs. Such international obligations provide predictability and stability in international trade. With these measures and the expected retaliatory measures that could be adopted by other countries, the stability and predictability of international trade could be undermined. ​

The US Administration's declaration of national economic emergency suggests that it could invoke Security Exceptions under Article 21 of the General Agreement on Tariffs and Trade of 1994 (GATT), part of the World Trade Organization (WTO) Agreements. If such measures are disputed before WTO Dispute Settlement Mechanism, Article 21 allows states to take necessary actions for the protection of essential security interests during emergencies in international relations. ​