Jordan risks sharp economic hit as the Middle East's most exposed to US tariffs

Jordan risks a sharper economic slowdown this year, as the kingdom is the most dependent on US exports among Middle East and North African countries, making it the region's most exposed nation to US tariffs. The Washington ally is subject to a 20 per cent levy on its exports to the US, despite the free trade agreement between the two countries since 2010, which could hamper its economic growth and widen its current account deficit, according to a new report by BMI. The Fitch company forecasts Jordan's economy will grow 2.1 per cent in 2025, down from 2.2 per cent last year, and a current account deficit at 7.4 per cent of its gross domestic product in 2025. "Within the Mena region, Jordan is the economy most dependent on exports to the US, followed by Israel, Libya, Iraq, Bahrain and Tunisia," BMI said in an April report. "The tariffs will lead to an even more pronounced slowdown in Jordan … and wider current account deficit." Despite the 20 per cent tariff charged by the US on imports from Jordan, this rate is still lower than almost all countries that export similar products to the US, which could put the kingdom at an advantage, BMI added. Jordan's exports to the US make up 6.6 per cent of the kingdom's GDP and comprise 28.4 per cent of the kingdom's total exports, according to BMI. The US total goods trade with Jordan stood at an estimated $5.4 billion in 2024, according to the Office of the United States Trade Representative. The US imports of goods from Jordan totalled $3.4 billion in 2024, up 15.4 per cent from 2023, according to the US government body's data. Meanwhile, US goods exports to Jordan in 2024 were $2 billion, up 30.9 per cent from last year. This means the US goods trade deficit with Jordan was $1.3 billion in 2024, a 2.3 per cent decrease over 2023. The US administration's tariffs on Jordan come despite the two countries signing a free-trade agreement (FTA), which entered into force on December 17, 2001, and eliminated duties on January 1, 2010. Jordan’s main exports to the US include garments, jewellery, fertilisers, pharmaceuticals, IT services, food products, live animals, and engineering goods, according to Jordan's Petra news agency. On the other hand, imports from the US consist of mineral products, transportation equipment, machinery, electrical appliances, grains, chemicals, medical devices, processed foods, wood pulp, animal products, furniture, iron and steel products, vegetable oils, and wood items. The economic shock to Jordan's economy from US tariffs comes after the aid-dependent Arab country was cut off from United States Agency for International Development (USAID) assistance. In February, US President Donald Trump ordered the shutdown of USAID, which sent “ripple effects” across Jordan's economy. The impact is “devastating” for the most vulnerable groups – from refugees to people with disabilities – in the agency's third-biggest aid recipient, the head of one of Jordan's larger non-government organisations told The National at the time. In March, ratings agency S&P Global said that Jordan's economy has remained resilient amid regional security risks and being cut off from USAID assistance, resulting in a stable outlook for the aid-reliant economy. The kingdom's long-term foreign and local currency sovereign credit rating was maintained at BB. Gulf countries, Egypt, Morocco, Lebanon, Iran and Sudan will have a US tariff rate of 10 per cent. That is lower than levies on Israel of 17 per cent. Tunisia has a tariff rate of 28 per cent, Algeria 30 per cent and Libya 31 per cent. Syria and Iraq are now subject to tariffs of 41 per cent and 39 per cent, respectively, indicating that Middle East countries will have varying fortunes with how their economies are affected by the US tariffs announced on Wednesday. "The US tariff announcement made on April 2 will create a significant negative economic shock to economies across Mena. The US will impose steep tariffs on imports from across the region, particularly from the Levant and North Africa," BMI said in its report. For Tunisia, given the diversified exports to the US, Trump's tariffs will exacerbate the pressure on its already weak external position and lead to slower growth than the currently expected expansion of 1.2 per cent, BMI said. In Israel, the government has removed all its tariffs on US products, and "we think the Israeli government and the US will reach an agreement to reduce the rate on Israeli exports to the US," BMI said. The exemption of oil from the US tariffs means that nearly all of Libya, Iraq and Kuwait's exports to the US will not be affected, nor will about 80 per cent of Saudi Arabia and Algeria’s exports to the US, the report said. The Atlantic Council in an April 3 report said the Mena region faces a "complex mix of risks" based on two categories: the Gulf oil exporters and the import-reliant economies of North Africa and the Levant. The World Trade Organisation's initial estimates show that the new US tariffs, coupled with those introduced since January, could lead to an overall contraction of around one per cent in global merchandise trade volumes in 2025, the body said in an April 3 statement. This represents a downwards revision of nearly four percentage points from previous projections. "I'm deeply concerned about this decline and the potential for escalation into a tariff war with a cycle of retaliatory measures that lead to further declines in trade," Ngozi Okonjo-Iweala, director-general of the WTO, said. "Many members have reached out to us and we are actively engaging with them in response to their questions about the potential impact on their economies and the global trading system." She warned that the tariffs have the potential to create "significant" trade diversion effects. The Geneva-based WTO, which upholds a free-trade mandate, said that it currently administers 74 per cent of global trade, down from around 80 per cent at the beginning of the year. Economies with the least responsibility for global trade imbalances are facing severe penalties – despite being the least equipped to absorb new shocks, according to the United Nations Trade and Development (Unctad). Just 10 of the nearly 200 US trade partners account for almost 90 per cent of its trade deficit, but the least developed countries and small island developing states – responsible for just 1.6 per cent and 0.4 per cent of the trade deficit, respectively – are being affected, the UN agency said. They will neither help balance the trade deficit nor generate significant revenue, it added. Many low-income economies now face a “perfect storm” of worsening external conditions, unsustainable debt levels, and slowing domestic growth. The global trade system is entering a "critical phase" that is threatening growth, investment, and development progress, particularly for the most vulnerable economies, Unctad said. “This hurts the vulnerable and the poor,” Rebeca Grynspan, Unctad's secretary-general, said. “Trade must not become another source of instability. It should serve development and global growth.” Ms Grynspan said this is the time for "co-operation – not escalation" and urged trade reforms while protecting the most vulnerable. Unctad called on decisions makers to "urgently reconsider" the tariffs imposed on the vulnerable countries, as these measures could "inflict great pain on millions of people."

Jordan risks sharp economic hit as the Middle East's most exposed to US tariffs

Kingdom is the most dependent economy on US exports from the Middle East ahead of Israel, Libya, Iraq, Bahrain and Tunisia