Trump's Tariffs Could Be A Boost To Middle East's Struggling Economies

The Middle East’s poorer countries have been struggling with warped, barely functioning economies for decades. Jordanians and Egyptians watched Southeast Asia develop manufacturing industries that lifted millions out of poverty, whereas they withered under bloated governments, layers of red tape and an elite engaged in rent-seeking.

Donald Trump’s decision to tear up the global trading system on Wednesday with a torrent of tariffs is, therefore, being met with a mixed reaction in these countries. "We have lived through all this before. It’s not new for us," an Egyptian paper manufacturer who wished to remain anonymous, told Middle East Eye. "You could even say we have an advantage now because everyone else just got more expensive."

Indeed, countries like Vietnam and Cambodia were slapped with 46 percent and 49 percent tariffs, respectively. Because the Trump administration calculated its tariff rate based on the difference between how much stuff the US buys from and sells to its trading partners, cheap manufacturing powerhouses that had their acts together got hit hardest.

Countries like Jordan and Egypt have been trying to get into the game of low-skilled manufacturing for years but have been outcompeted by Southeast Asia. Although all countries will feel the sting if Trump’s tariffs spark a global recession, some sniff out an opportunity in a chaotic new world.

“The Southeast Asian tariffs are the ones that will make a difference for Egypt and the Middle East,” Hisham Fahmy, the CEO of the American Chamber of Commerce in Egypt, told Middle East Eye.

“This is absolutely a boost for Egypt’s garment industry. One of the main exporters just sent me a message saying this is good for us, but we have to see.”

Egypt was hit with just a 10 percent tariff rate, the lowest baseline introduced by the Trump administration.

'Trump just made it easier for Egypt'

On the surface, Egypt doesn't have much to attract industrialists.

Its economy is in a crisis, having been decimated by inflation and successive currency devaluations. The drop in the Egyptian pound’s value has made importing raw materials more costly for Egyptian manufacturers, and the country has been suffering from electricity rationing.

Egypt’s exports to the US have never been that impressive. Garments and textiles make up 51 percent of its total exports. Iron and steel come in next at barely nine percent.

But experts say that in Trump's world, all Egypt needs to do is be cheaper than Southeast Asia in low-skilled manufacturing. The prime example is the garment industry, which is fairly mobile and requires relatively little up-front investment. 

“Trump has just made it easier for Egypt, with all our corruption and more expensive labor costs to compete with Asia,” the paper manufacturer told MEE.

Egypt’s manufacturing industry goes back to the days of Muhammad Ali Pasha, the Ottoman governor who fashioned the modern Egyptian state in the early 19th century. By WWII, Egyptian manufacturing was well established but in the hands of Greek, Italian and Armenian industrialists. When Gamal Abdel Nasser overthrew Egypt’s monarchy in 1952, he nationalized the factories and imposed trade restrictions - not unlike Trump.

Hosni Mubarak unleashed post-Soviet-style crony capitalism on Egypt. By then, its market had already been overrun with cheap imports. In sum, Egypt’s manufacturing sector is creaky and old, but it has a foundation to build on if global supply chains adjust to Trump's tariff in the medium to longer term. 

The situation is more complicated in Jordan. Jordan's economy keeps spinning thanks to a vast government patronage system backed by American aid, but it has some manufacturers. 

Jordan has a small garment industry that has struggled to compete with Egypt and especially Turkey. However, some manufacturers have carved out a niche for themselves exporting to the US by capitalising on Jordan’s Free Trade Agreement with the US.

Jordan and nearshoring

Jordan’s bilateral trade with the US, a small $5.4bn, is paltry from the US perspective, but for Jordan, it is a lot, Nael al-Husami, CEO of the Amman Chamber of Industry, told MEE. Jordan’s exports to the US have been growing in recent years. US goods imports from Jordan totalled $3.4bn in 2024, up 15 percent from 2023.

“For the US, Jordanian exports are meaningless, but if these tariffs continue, we will be affected. We lost our privileges of the FTA,” Husami told MEE. Jordan has benefited from exporting potash, a fertiliser, to the US amid the war in Ukraine.

One of the most prominent companies exporting to the US in Jordan is Petra Engineering Industries, a manufacturer of customised heating and cooling, or HVAC systems. MEE visited the plant in 2022 when Jordan hoped to benefit from trade tensions between the US and China.

A Jordanian executive speaking to MEE on the condition of anonymity said that even with the 20 percent tariff rate imposed on Jordan, relative to China and the European Union, Jordan will remain competitive. “Everyone is getting tariffed. Jordan’s tariff rate is not nearly as bad as other countries,” the executive said.

“The tariff is going to be a killer for Jordanian exporters who are doing tenders and have merchandise with specific profit margins locked in. But most Jordanian exporters won’t feel it because they are just selling and shipping from the factory floor. The American consumer will pay a higher price,” the executive said.

Executives in the Middle East say other countries like Morocco could also pinch new business thanks to Trump's tariffs.

The North African country is primed to pounce as companies look for easy options to re-orient supply chains with limited investment. Morocco is already the leading car manufacturer in Africa and could snag more business from Europe and potentially Canada and Mexico. Morocco was slapped with a 10 percent tariff by Trump. 

So, as Trump’s tariffs turn the tables on the global trading system, the Middle East may be the least bad place to be for making relatively cheaper products.