U.S.-China Trade Dispute Poised to Impact Middle East Economies and Strategic Choices

Answer first: The ongoing U.S.-China tariff conflict, characterized by reciprocal import taxes and retaliations, is expected to slow global economic growth and depress oil prices, thereby affecting Middle Eastern economies reliant on energy revenues. While some regional countries may benefit from redirected investments, the dispute…

Policy context for IP teams

The escalating tariff conflict between the United States and China, often described as a trade war, is primarily a series of punitive taxes imposed on imports by each country. The U.S. initiated this cycle by levying tariffs up to 25 percent on hundreds of billions of dollars worth of Chinese goods. China responded with retaliatory tariffs of similar magnitude, and both nations continue to threaten further measures, deepening the economic tension.

These tariffs increase import costs, leading consumers in both countries to pay higher prices and reduce consumption. Consequently, trade volumes decline, dampening economic growth. Experts widely agree that trade wars produce no winners; both parties suffer losses, although the impact may be uneven. For instance, American agricultural exports to China have been significantly affected, prompting the U.S. government to allocate billions in aid to support farmers harmed by the tariffs.

Key takeaways for U.S.-China trade war Middle East impact

• Confirm how the development affects policy ownership, enforcement, licensing, or portfolio records.
• Separate confirmed facts from legal interpretation before advising business teams.
• Map deadlines, affected assets, contracts, and evidence files to the responsible internal owner.
• Use the issue as a prompt for monitoring, filing strategy, dispute preparation, or member education.

Practical analysis

President Donald Trump’s rationale for initiating the trade dispute centers on pressuring China to reform several contentious economic practices. These include industrial espionage, intellectual property theft, forced technology transfers, extensive government subsidies to select industries, and restrictions on foreign businesses in key sectors. Many American analysts, including critics like New York Times columnist Thomas Friedman, concur that China has violated commitments made upon joining the World Trade Organization nearly two decades ago.

The effectiveness of tariffs in compelling China to alter these policies remains uncertain. However, there is speculation that the U.S. may avoid escalating the conflict further to prevent greater mutual economic harm. Senior American policymakers have advised caution, and partial agreements between the two economic giants may emerge to de-escalate tensions.

A distinctive feature of this trade dispute is the considerable authority vested in the U.S. president to set tariffs and trade policies under laws such as the International Economic Emergency Powers Act. President Trump’s assertive and unpredictable use of this authority has drawn keen interest from Chinese officials and experts, who note his readiness to abruptly change positions on sensitive issues.

Given that the U.S. and China are the world’s two largest economies and major trading partners, a contraction in their trade relations adversely affects the global economy. Stock markets worldwide tend to react negatively to news of heightened trade tensions and rally when prospects for resolution improve.

The Middle East faces particular vulnerabilities amid this dispute. Many regional economies depend heavily on oil revenues, and oil prices are closely tied to global economic conditions. A slowdown or recession triggered by the U.S.-China trade conflict would likely depress oil demand and prices, inflicting a dual economic blow on oil-exporting Middle Eastern countries.

Indirectly, the trade tensions may also redirect U.S. and Chinese economic activities toward the Middle East. China could expand its substantial investments in infrastructure and other sectors in countries like Egypt, which offers a large population and relatively low costs. Similarly, some American companies might seek new opportunities in the region as they adjust to the shifting global trade landscape.

Importantly, Middle Eastern states generally are not forced to choose exclusively between closer economic ties with the U.S. or China, unlike situations involving sanctions on Iran. This dual interest from both powers could partially offset the negative economic impacts of the trade dispute.

Nonetheless, certain critical sectors may compel the Middle East to make difficult choices. Security-related trade and investment—encompassing weapons sales, cyber technology, and sensitive raw materials—are areas where U.S.-China rivalry is intensifying. The widespread use of Chinese telecom firm Huawei’s technology and the sale of advanced American military equipment exemplify this competition. As bilateral relations deteriorate, both countries may seek to dominate these sensitive markets, increasing pressure on Middle Eastern governments to align with one side.

In sum, the U.S.-China trade war is poised to exert mostly indirect and limited effects on the Middle East, with predominantly negative economic consequences tempered by some potential opportunities. Policymakers in the region would benefit from advocating for a negotiated resolution to the trade tensions, which would serve the interests of the Middle East as well as those of the American and Chinese economies.

David Pollock, Bernstein Fellow at The Washington Institute and director of Project Fikra, originally published this analysis on the Asharq al-Awsat platform.

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