US tariffs will not majorly affect MENA economies, says BMI Research

Cairo – March 17, 2025: BMI, the research unit of Fitch Solutions, has indicated that MENA countries, especially those in the Gulf Cooperation Council (GCC), are unlikely to face direct tariffs from the Trump administration. In its MENA Monthly Outlook Report, the firm emphasized that economic and strategic factors would protect these nations from such measures.

While the region’s exports are not expected to experience significant disruptions, the report highlights potential challenges related to oil prices and inflation. Emerging markets with higher debt levels in the region are anticipated to be more vulnerable to these impacts.

Specifically, Egypt is expected to face particular challenges as the dollar strengthens, which will put downward pressure on currencies such as the Egyptian pound.re

BMI explained, “A stronger dollar will exert depreciatory pressures on the currencies of Algeria, Morocco, Tunisia, Israel, and Egypt. This scenario would pose significant challenges for Egypt, as it could slow the decline in price growth, hinder the monetary policy easing cycle, and adversely impact economic growth.”

Looking ahead to Egypt's economy in 2025, BMI forecasts a real GDP growth of 3.89 percent, with the Egyptian pound expected to stabilize at 52.51 against the USD by the year’s end.

The report also discussed the broader monetary landscape, with the firm anticipating a 45 percent probability that the US Federal Reserve will cut interest rates by 50 basis points in 2025. It assigns a 30 percent chance to a smaller 25-basis point cut and a 10 percent chance to a 25-basis point hike.

The report further noted that tight US monetary policy would create challenges for policymakers in the GCC and Jordan, particularly since inflation remains relatively low.

This would also exert pressure on non-oil sectors in the GCC and Jordan’s overall economy. Egypt, too, could suffer from risk-off sentiment, leading to potential outflows of portfolio investments.

The firm’s core forecast expects Brent crude prices to average $76 per barrel in 2025, down from $80 per barrel in 2024. Lower oil prices could negatively affect MENA’s oil-exporting countries, likely prompting OPEC+ to delay the return of oil to the market. On the other hand, MENA’s net oil-importing countries, including Egypt, would benefit from lower oil prices, reducing their import bills and government spending on subsidies.

In terms of trade relations, BMI highlighted that the Trump administration is unlikely to impose direct tariffs on MENA countries, mainly due to broader economic and strategic considerations. “Imposing tariffs would counter Trump’s efforts to expand the Abraham Accords and reduce China’s influence in the Middle East,” the report stated.

The administration aims to deepen ties with Saudi Arabia, and imposing tariffs on GCC oil exports could drive the region closer to China, which would undermine US objectives.

The report also addressed the potential impact of higher aluminum tariffs on MENA economies. While Bahrain’s exports to the US account for 5.5 percent of its total exports and 1.5 percent of GDP, BMI believes that the effects will be manageable.

This is due to strong global aluminum demand, which is expected to offset weaker US demand. As a result, Bahrain and other countries could redirect exports to other markets, and the US may seek a deal with Bahrain and the UAE to mitigate the impact.