How UAE residents expect to pay the price of Trump tariffs

Rutuja Marfatia, a small-business owner in the UAE, is preparing for potential ripple effects from the global tariff row unleashed by US President Donald Trump. She says any kind of uncertainty around global economic sentiment makes her pause. “While we may not feel the immediate impact, rising uncertainty around business sentiment could result in companies panicking and first reducing marketing spend, which impacts us,” says Ms Marfatia, who runs a communications agency. “It’s hard to say how soon or how directly we might feel the impact but given how connected global supply chains are, from tech to logistics, price increases in certain categories wouldn’t be surprising. Hopefully, this situation resolves before it reaches that point but it's definitely something to keep an eye on.” Ms Marfatia adds that she doesn't plan to change her purchasing behaviour at this stage and that she would re-evaluate in the coming months if the situation escalates or starts to directly impact costs. "For now, I think many of us are adopting a wait-and-watch approach, hoping for a resolution before any significant changes are necessary,” she says. She echoes the sentiment of millions of consumers globally who have been rattled by the stock market rout and economic uncertainty following the more-aggressive-than-anticipated tariffs announced by Mr Trump on April 2 and China’s response. The UAE was among the countries hit with a "baseline tariff" of 10 per cent. Global markets have been in free fall since Mr Trump unveiled the levies. His universal tariff took effect last Wednesday, while the higher “retaliatory” measures are due to start today. Hours after he threatened to impose additional 50 per cent tariffs on China, Beijing pledged to retaliate, vowing to fight the imposition “to the end”. The UAE and Saudi Arabia are two of the largest exporters to the US, and key products such as oil, gas and refined products – a substantial portion of the exports – are exempt, thus the impact on the Gulf is “likely to be minimal for now”, say analysts at Nasser Saidi and Associates, a Dubai-based advisory firm. Volatility has surged, with $10 trillion wiped off global equities after last week's announcement. Dubai resident Zeeshan Masud’s stock portfolio has been badly affected. “As someone who has been actively invested in the US stock market for some time, particularly in blue-chip tech and AI-focused companies, I have certainly felt the impact of Trump’s tariff announcements,” he says. “Companies like Nvidia, for instance, have seen significant drops in market value [down about 30 per cent], which has directly affected portfolio performance and market sentiment. “That said, I remain confident in the long-term fundamentals of these businesses. Volatility is part of the game and while the short-term outlook may be bumpy, I believe companies with strong fundamentals and healthy balance sheets will bounce back once the dust settles.” Similarly, US expat Blair Hoover has also seen her investment portfolio decline by about 10 per cent over the past week. However, much more concerning are the long-lasting ramifications of the tariffs and other policies of the Trump administration, she says. The US is “almost certainly” diving into a recession and could pull much of the world economy down with it. The US is isolating itself from its allies in ways that will shift the prevailing world order. These shifts will have a much larger and longer lasting impact than the current stock market correction, Ms Hoover fears. Mr Trump on Friday called on Federal Reserve Chairman Jerome Powell to cut interest rates, saying it was the "perfect time" to do so. But Mr Powell warned that the new tariffs were likely to push inflation higher while slowing economic growth, suggesting the Fed would not be rushing to cut rates. Praveena Yadav, senior mortgage consultant at YouAE Mortgages, says there are two “extreme predictions” regarding interest rates. One group of analysts predicts that interest rates might be reduced by as much as 100 basis points, while another suggests that rates could increase significantly due to inflation data. At this point, the direction of the market remains uncertain. It's important to note that in the last two instances, the Federal Reserve made no changes, yet banks continued to maintain the interest rates they were offering to customers, according to Ms Yadav. “I don’t foresee any impact on interest rates in the near future unless the Federal Reserve takes significant and drastic action,” she adds. Ben Crompton, managing partner of Abu Dhabi real estate agency Crompton Partners, believes the new tariffs are unlikely to have any immediate impact on the UAE's real estate sector. However, he warns that there are two potential ways in which the real estate sector might be affected in the longer term. If the UAE responds with its own tariffs on US goods, this could affect the import of building materials from the US. As a result, construction costs in the UAE may increase, he warns. Broader concerns about the impact of US tariffs on the global economy could lead to a slowdown or even a global recession. Should this occur, the UAE’s housing market could face significant challenges, as it would not be immune to global economic pressures, Mr Crompton says. “On the flip side, there’s also the possibility that building materials might become cheaper. If other countries reduce their exports to the US due to these tariffs, the UAE could become an alternative market. Materials such as aluminium and steel, which would otherwise go to the US, might flood other markets, including the UAE. This oversupply could eventually drive down the cost of building materials, benefiting the construction sector in the long run,” he adds. Eyal Ashur, a UAE property sales consultant, believes consumers in the UAE are going to feel the tariff impact in numerous ways. Complex products manufactured in the US are likely to be affected. Raw materials imported to the US are now taxed, as well as nations that manufacture components, such as China, he says. “In the short term, think of a new iPhone, new laptop or a new muscle car that will increase significantly in price. In the long term, this will also affect prices in other industries such as your flight ticket to Bali or your medical treatment,” he says. Similarly, Sonal Chhiber, a UAE resident who works in corporate communications, expects to feel the impact of tariffs in terms of higher costs for everyday consumer goods, especially electronics, appliances and clothing. Since she relies heavily on digital tools such as cloud storage, design software, CRM platforms and data analytics tools, many of which are developed or hosted in tariff-affected countries, Ms Chhiber expects subscription costs may rise. If tech companies pass on the increased operational costs to customers, it could lead to higher monthly or annual fees. Even hardware such as laptops, smartphones and other work-related gadgets could become more expensive, affecting productivity and budgeting, she says. Prices of products with components sourced from China or other targeted countries could also rise, she adds. Abu Dhabi-based US expat Ms Hoover believes the tariffs will have far-reaching effects globally, primarily by increasing consumer prices in the US on most goods and services, which will have enormous knock-on effects. Small and medium-sized businesses in the US will experience decreased demand as consumers have to tighten their budgets while they simultaneously experience increases in supply chain costs. This could lead to many businesses laying off employees or closing down, she fears. “A US recession will affect the world as it is the largest single consumer market in the world. In the UAE, we will see the direct effect of increased prices on goods we import from the US,” Ms Hoover says. “I am worried about a particular medication that I import from the US that may become more difficult to source. I'm going to stock it up. I imagine we will see this effect for all goods imported from the US as businesses there face increased costs and pass that on to the consumer. Only time will tell how severe the impacts are.” The dollar fell nearly 3 per cent in the first three months of the year, as traders scaled back their optimism about the economic impact of Mr Trump’s policies. With the Gulf currencies pegged to the US dollar, the fall in the value of the greenback affects UAE residents’ global purchasing power and that can lead to real price increases on imported goods, according to Keren Bobker, senior partner at Holborn Assets. Many people are price-sensitive in terms of how they spend their money, so increases in cost will lead to reduced spending for a significant portion of the population, she says. “There are also many people who will try to avoid purchasing American products as a protest again the actions of the Trump government. Many consumers will pay more attention to the country of manufacture. I would expect many of us to look to buy regionally where possible,” Ms Bobker adds.

How UAE residents expect to pay the price of Trump tariffs

Most expect price increases in certain categories due to interconnected supply chains