A Trump victory would have a mixed impact on US and Gulf ties due to several factors, such as trade tariffs, oil production, strong U.S. support, and urgent conflict resolution.
Trump’s proposed tariffs on imports might strengthen the US dollar through reduced spending on foreign goods, benefiting GCC currencies like the Saudi riyal or the UAE dirham. A stronger dollar from Trump’s protectionist policies would also increase foreign investment in the GCC region. Further, imposing high tariffs on trade partners in the Gulf countries could strain US-Gulf relations. However, if a favorable trade agreement is achieved between the two regions, balance, and strong ties can be maintained.
Additionally, since Trump is pro-fossil fuel, he would focus on improving the US energy market by increasing US oil production. His hardline stance on certain geopolitical issues might increase the risk premium in oil. So, the overall impact in the medium term is likely to be muted for the commodity. Moreover, gulf countries are actively working on improving their non-oil economy, with the UAE’s non-oil sector expected to grow 5.2% in 2024 and Saudi showcasing a non-oil sector growth of 4.2% YoY. Further, any geopolitical escalation that could harm oil supplies is expected to be bullish for the commodity.
Moreover, under Trump’s previous administration, the Gulf countries like UAE and Saudi enjoyed unprecedented levels of U.S. support on key issues. In his second term, Trump is expected to maintain status quo, which would introduce a significant moat for the business environment in the GCC region. Therefore, Trump’s transactional leadership style makes him a crucial partner in enhancing these regions’ influence.
Finally, Trump is more likely to resolve regional conflict faster as compared to his counterpart, Harris. This is expected to promote further stability in the Gulf region under a Trump victory.
