A New Era of Global Economic Uncertainty

The recent Trump administration’s action to uproot global trade by imposing huge tariffs on nations across the world has sent shockwave in global financial markets. It is clear that free trade and the era of global multilateralism that the US spearheaded since the Second World War is now effectively over, treating both friend and foe as equal trading partners in an attempt to put America First.

I personally believe that this is an ill-founded strategy, which will put the US economy in a highly problematic position as it finds nations less willing to do business with it, as trading blocs rethink their trading strategy, and as business with the largest economy of the world stops making business sense. By alienating the world, the current strategy may well backfire as the US finds itself a pariah state. While the US is undoubtedly an important player in world trade, so are the rest of world nations.

This news has not been received well as it plunges the world economy into uncertain waters, pummeling it again once more. Since the 2000’s the global economy has undergone major strain, with the bursting of the dot-com bubble, the 2008 world financial crisis, the European sovereign debt crisis and the COVID pandemic and now this. The world economy took a battering during this period, and while it showed resilience, its hasn’t properly recovered from the huge scars that the 2008 financial crisis left such as financial institutions closing,  stock market plummeting and a global recession the likes of which have not been seen since the Great Depression of the 1930’s.

The dramatic nature of Trump’s actions show that he wants to fundamentally change the balance of the US dollar on the world stage. Being the preferred currency of the world, businesses and nations sell more to the US rather than buy from it to accrue valuable US dollars. By potentially crashing the dollar, Trump wants to reverse this so that US goods become cheaper to buy to increase revenue flowing into the country. This is what he thinks may happen, but the consequences of such a dramatic move may well damage the reputation of his party and the country for years to come.

The most recent news is that the US has put tariffs of 125% on Chinese imports, with the Chinese retaliating with tariffs of 125% on US goods. Such measures do little to heal international wounds that already run deep. This will hit the US consumers hard, as even if the U.S. somehow manufactures in the quantities that China does to meet domestic demand, it simply will not be able to match it on price. China has developed economies of scale and specialized expertise that has taken it the last fifty years to build, not to mention an incredible workforce which the US simply cannot replicate so quickly.

No one is exempt and we must buckle up in this region for tougher times ahead. For nations in the Middle East, these new measures present significant challenges but also opportunities to adapt and strengthen economic resilience. Having advised on the World Trade Organization's advisory council and being a staunch advocate for economic resilience, I urge Middle Eastern nations and businesses to adopt proactive strategies to mitigate these challenges.

Strategic responses for our nations include:

Diversifying export markets to provide alternative avenues for growth Strengthening regional trade agreements
Investigating alternate supply chains and promoting local manufacturing
Increasing the quality of production to reduce dependency on imports
Optimizing customs clearance procedures to ease trade and better leveraging free trade zones
Easing visa restrictions to boost trade and promoting a better trade culture between nations.

These are some humble suggestions on my part that I believe will help to alleviate some of the pain this new status quo will bring. As this is a dynamically unfolding scenario, we must keep our finger on the global pulse and be flexible enough to react to a changing environment where it seems that anything is possible.

The tariffs introduced by the US have certainly ushered in an era of uncertainty. With every challenge comes an opportunity, and for the Middle East this is a chance to innovate, diversify, and strengthen both regional cooperation and global partnerships. By adopting strategic reforms and leveraging technological advancements, I believe that the region can not only withstand this storm, but emerge stronger in its aftermath.

Talal Abu-Ghazaleh