As global economic powers engage in an increasingly volatile trade war, ripple effects are being felt well beyond the frontlines. The Middle East and North Africa (MENA) region, often overlooked in this struggle, is quietly absorbing the aftershocks, disrupted supply chains, commodity price swings, and a pressing need to recalibrate its economic architecture.
Why the Trade War Matters to MENA?
While the MENA region isn’t directly involved in the U.S. – China or EU – China disputes, its strategic trade position and heavy reliance on imports mean it’s feeling the tremors. Home to key chokepoints like the Suez Canal and Strait of Hormuz, this region plays a vital role in global commerce. A disruption in supply chains or tariff policy anywhere in the world has a knock-on effect here. Jihad Azour, director for the Middle East and Central Asia at the IMF, stated that global economic uncertainty driven by tariff plans from the U.S. and other countries as well as ongoing geopolitical tensions is putting pressure on the region’s economies and could reduce their growth by between 2% and 4.5%
A Region Unevenly Affected
Heavily Affected countries like Egypt, Lebanon and Jordan are highly dependent on imported food, electronic items and industrial materials. These economies are struggling with rising prices and delayed shipments.
More resilient countries like the UAE, Saudi Arabia, and Qatar are better positioned due to economic diversification and large sovereign reserves. They are actively forging alternative trade routes and investing in regional supply chains.
Which Sectors Are Feeling the Heat?
The impact of the trade war across the MENA region is not uniform some sectors are significantly affected, while others remain relatively insulated.
- Highly Exposed to Global Supply Chains (Most Affected)
These sectors depend heavily on imported components, materials, or machinery and are among the first to feel the strain:
- Construction & Infrastructure: Reliant on imported steel, cement, and heavy machinery. Trade disruptions lead to cost escalation and project delays. The construction and infrastructure sector is a notable growth driver in MENA. It contributes roughly 8.4% of the region’s GDP, equivalent to about $187 billion in output in 2021
- Manufacturing: Faces bottlenecks due to shortages of components, chemicals, and industrial machinery sourced internationally. Manufacturing activity makes up around 10% of GDP in the Arab countries of MENA. In 2022, the manufacturing value-added share in Arab economies was about 10.3% of GDP.
- Technology & Electronics: Tariffs and access restrictions from East Asia and the U.S. impact pricing, availability, and supply timelines. The technology and electronics segment is growing but still forms a modest portion of MENA’s GDP. In 2023 mobile technologies/services contributed about 5.5% of MENA’s GDP.
2. Indirectly Impacted via Price and Supply Volatility
These sectors aren’t directly targeted by trade disputes but are exposed to global commodity cycles and logistical instability:
- Food & Agriculture: Highly sensitive to fluctuations in global commodity prices. Disrupted imports of wheat, oils, and grains drive food inflation. It accounts for roughly 5–6% of GDP (2020-2021) in the Arab region
- Healthcare & Pharmaceuticals: Reliant on imported medical equipment, active pharmaceutical ingredients (APIs), and consumables. The MENA healthcare market was about $243.6 billion in 2023.
- Banking & Insurance: Exposure to currency fluctuations and commodity price volatility impacts asset pricing, lending risk models, and financial forecasting.
3. Moderately Insulated – Affected More by Global Market Forces
Some sectors are influenced more by geopolitical or macroeconomic trends than by trade restrictions:
- Oil & Gas: Market dynamics in this sector are governed more by OPEC+ decisions, global demand, and geopolitical events. The hydrocarbon industry often contributes between ¼ to ⅓ of the region’s total GDP
- Real Estate & Construction: Large-scale commercial or residential development may experience indirect delays due to funding constraints or costlier imported materials. S&P Global projects the real estate contribution to rise from ~6% of GDP to around 10% by 2030
4. Largely Insulated – Regionally Anchored or Domestically Driven
These sectors function mostly within regional or local ecosystems and are shielded from international shocks:
- Tourism: Especially in the Gulf, tourism depends on regional travel flows, infrastructure, and visa policy—not goods movement. Travel & Tourism contributed about 8.4% of MENA’s GDP (≈$324 billion in 2019). This fell sharply to about 4.5% of GDP ($163 billion) in 2020 amid COVID-19 disruptions. The sector is now rebounding in 2021 it recovered to ~$188.5 billion
- Retail & Domestic Services: Typically driven by internal consumption. Impact surfaces only if inflation erodes consumer purchasing power. The MENA retail market was estimated around $315.7 billion in 2022, indicating a substantial contribution to GDP
Strategic Responses Emerging
The trade war has exposed critical vulnerabilities in the MENA region’s economic architecture, but it has also become a catalyst for transformation. Many governments and businesses are using this period of disruption to rethink long-standing dependencies and implement more resilient, future-proof strategies.
First, there is a clear push toward supplier diversification. Countries like the UAE and Saudi Arabia are actively seeking trade relationships beyond the traditional U.S.–China axis, forging deeper ties with Southeast Asia, Africa, and even intra-regional partners. This not only reduces reliance on a single market but also improves supply chain flexibility.
Secondly, there’s a growing investment in domestic manufacturing and localization. Several nations are introducing policies and incentives to boost local production of essential goods, particularly in food, pharmaceuticals, and light industry sectors most vulnerable to international supply shocks.
Digitalization is also playing a major role. Governments are accelerating the adoption of digital trade infrastructure, smart customs systems, and logistics tech. This includes AI-driven analytics, blockchain for supply chain transparency, and investments in smart ports and free zones.
Finally, regional cooperation is gaining momentum. The trade war has highlighted the value of regional trade corridors and economic blocs, prompting MENA countries to revisit and strengthen frameworks like the Gulf Cooperation Council (GCC) and trade routes linking the Middle East with Africa and South Asia.
Together, these strategic shifts represent not just reactive measures, but a deeper realignment of MENA’s global economic positioning, one that embraces resilience, technology, and cross-border collaboration.
Conclusion: A Region in Realignment
The MENA region may not be the main battleground in the global trade war, but it’s certainly in the line of fire. The effects are uneven, but also catalyzing reform, innovation, and self-reliance.
As the dust settles, countries that adapt, digitize, and de-risk their trade strategies will be the ones leading the region into a more resilient and future-ready era.
