Turning Tariff Wars into Opportunities: The Rise of Localized Production in the UAE and Saudi Arabia

Introduction:

The Global Chessboard of Trade Wars The world is witnessing a seismic shift in global trade dynamics. As major economies like the United States, China, and the European Union (EU) engage in tit-for-tat tariff wars, businesses and nations are scrambling to adapt. But amidst the chaos lies a silver lining for agile economies: the localization of production. For countries like the United Arab Emirates (UAE) and Saudi Arabia (KSA), this is not just a defensive strategy—it’s a golden opportunity to redefine their roles in global supply chains. By embracing the “Made in the Emirates” and “Made in Saudi Arabia” mantras, these nations can position themselves as neutral, reliable exporters to markets locked in trade disputes. Let’s explore how.

1. The Tariff War Landscape: A Brief Overview

The resurgence of protectionist policies, particularly under U.S. President Donald Trump, has reshaped global trade. In 2024, Trump proposed sweeping tariffs on Chinese electric vehicles (60%), Indian steel (25%), and EU agricultural goods (10%), reigniting tensions. These moves follow his earlier 2018–2020 trade wars, which targeted $370 billion of Chinese imports and triggered retaliatory measures from Brussels and Beijing.

The logic is simple: tariffs make imported goods more expensive, theoretically incentivizing domestic production. But the reality is messier. Companies caught in the crossfire face higher costs, disrupted supply chains, and shrinking market access. For example, European luxury automakers and Chinese solar panel manufacturers have long relied on open access to the U.S. market—a privilege now under threat.

This creates a vacuum. When giants fight, smaller players can thrive—if they act strategically.

2. How Tariff Wars Create Opportunities for Third-Party Exporters

When the U.S. slaps tariffs on Chinese goods, Chinese exporters lose competitiveness in America. Conversely, American products become pricier in China due to retaliation. This opens doors for countries not embroiled in the dispute to step in as alternative suppliers.

Consider the UAE and Saudi Arabia. Both nations have three critical advantages:

• Geopolitical Neutrality: They maintain relatively balanced relations with the U.S., EU, China, and India.
• Strategic Location: Proximity to Asia, Africa, and Europe enables cost-effective logistics.
• Visionary Economic Plans: Saudi Vision 2030 and the UAE’s “Operation 300bn” prioritize industrial diversification and export growth.

By localizing production, these countries can bypass tariffs, offer competitive pricing, and cater to markets hungry for alternatives.

3. Case Study: “Made in the Emirates” and “Made in Saudi Arabia”

The UAE and Saudi Arabia are already laying the groundwork to capitalize on this moment.

A. UAE’s Manufacturing Push The UAE’s “Make it in the Emirates” initiative aims to boost industrial sector contributions to GDP to $81 billion by 2031. Key sectors like aerospace, pharmaceuticals, and advanced materials are seeing massive investments. For instance:

• Abu Dhabi’s KEZAD Group Industrial Zone offers tax breaks and streamlined logistics for manufacturers.
• Dubai’s DP World has expanded its port infrastructure to handle growing export volumes.

B. Saudi Arabia’s Vision 2030 in Action Saudi Arabia is transitioning from an oil-dependent economy to a manufacturing powerhouse. The “National Industrial Strategy” targets 36,000 new factories by 2035, with $1.3 trillion in investments. Key moves include:

• NEOM : A $500 billion smart city project focusing on renewable energy and tech-driven industries.
• Ras Al-Khair: A shipbuilding hub attracting international firms like Hyundai.

C. Success Stories

• Agthia Group PJSC (UAE): This food and beverage giant now exports “Made in UAE” products to 40+ countries, including tariff-hit markets like the EU.
• 沙特基础工业公司 (Saudi Arabia): The petrochemical leader has avoided U.S.-China tariffs by supplying American manufacturers from Saudi-based plants.

4. Strategies for Seizing the Localization Opportunity

To fully exploit the tariff war disruption, the UAE and KSA must focus on four pillars:

A. Attract Foreign Direct Investment (FDI) Companies seeking to dodge tariffs will relocate production. The UAE and Saudi Arabia can lure them with:

• Tax holidays (e.g., UAE’s 0% corporate tax in free zones).
• Subsidized energy costs (a major advantage for energy-intensive industries).

B. Build Export-Oriented Industries Prioritize sectors where demand is rising in tariff-affected markets:

• Renewable Energy Tech: The U.S. and EU are pushing solar/wind energy but face high costs for Chinese imports.
• Pharmaceuticals: Post-pandemic, countries are diversifying drug sources away from China and India.
• Luxury Goods: European brands hit by U.S. tariffs could partner with Emirati manufacturers for transshipment.

C. Leverage Trade Agreements Both nations have signed Comprehensive Economic Partnership Agreements (CEPAs) with India, Turkey, and South Korea. Expanding these networks will reduce export barriers.

D. Invest in Branding “Made in the Emirates” and “Made in Saudi Arabia” must become synonymous with quality and reliability. Initiatives like Saudi’s “Quality Mark” program can build trust.

5. Challenges and Risks

The path isn’t without hurdles:

• Competition: Vietnam, Mexico, and Indonesia are also vying for tariff refugees.
• Labor Costs: While automation can help, skilled labor shortages persist.
• Geopolitical Risks: Balancing relations with the U.S., China, and regional rivals requires deft diplomacy.

6. Conclusion: A Call to Action

The tariff wars are a wake-up call. For the UAE and Saudi Arabia, this is a historic chance to pivot from hydrocarbon economies to global export hubs. By investing in infrastructure, incentivizing manufacturers, and crafting a compelling “Made Here” narrative, they can turn trade turbulence into triumph.

To businesses and policymakers: The time to act is now. Tariff wars won’t last forever, but the competitive edges built today will define tomorrow’s economic leaders. Let’s make “Made in the Emirates” and “Made in Saudi Arabia” the next global hallmark of innovation and resilience.

Ministry of Industry & Advanced Technology | ????? ??????? ???????????? ???????? Ministry Of Economy, UAE Public Investment Fund (PIF) Ministry of Investment Khalifa Fund | ????? ?????