Arab Finance: The global trade landscape is undergoing seismic shifts as protectionist policies gain momentum, signaling profound implications for globalization and international commerce. US President Donald Trump's recent tariffs on imports from several countries, including Egypt, exemplify this trend. These measures not only challenge Egypt's export-driven industries but also highlight broader disruptions in global trade cohesion. As experts assess the immediate and long-term implications of these policies, they emphasize the delicate balance the country must strike: navigating the turbulent waters of international trade while adapting to the changing competitive landscape.

The Future of Egyptian Trade in a Turbulent Global Market

On April 2nd, the US imposed global tariffs ranging from 10% to 50% on its imports from any country worldwide. Egypt faces the lowest tier, a 10% tariff, unless specific goods are exempted or fall under higher tariff categories. This comes alongside existing 25% tariffs on imported steel.

Following Trump's new tariffs, Chief Secretary to the Treasury Darren Jones declared the 'end' of globalization. This declaration coincides with a turbulent global trade scene after the announcement. However, it is not yet clear whether this will have a negative impact on Egypt. The President of the Egyptian Exporters Association, Mohamed Qasim, tells Arab Finance: “Trump's decisions are indeed causing some turmoil in the markets, which could lead to problems in the long term. However, that is not the basis, as we must wait until things calm down and become clearer. For example, after Trump issued these new decisions, he suspended them for 90 days, so we have 90 days to consider the implications, and after that, it is yet to be known.”

Meanwhile, Dina Samir ElWakkad, an economics instructor and economist, tells Arab Finance: “The newly imposed tariffs by President Trump might disrupt global supply chains, leading to increased production costs and inflationary pressures worldwide. For Egypt, which relies heavily on imports for various raw materials and goods, this could exacerbate trade deficits and strain foreign currency reserves, potentially impacting the stability of the Egyptian pound.”

When it comes to the 25% tariffs on steel, demand for Egyptian steel exports will not be significantly impacted. Qasim points out that "these tariffs are a burden for all steel-exporting countries; it will not matter from one country to another. If we were competitors without customs—meaning with normal customs—and high customs were imposed on everyone, our competitive position would remain the same and would not change.”

However, when it comes to other exports from Egypt to the US, the situation is different. Qasim explains that “Trump has imposed higher tariffs on others than he has on Egypt. Consequently, countries that compete with us in certain industries, including the apparel industry, which is Egypt's largest export item to the US, totaling $1.2 billion, find themselves in a more challenging position. Therefore, Egypt's competitive position is improving.”

ElWakkad argues that “higher tariffs on competitors could make Egyptian products more attractive in the U.S. market; however, capitalizing on this opportunity requires strategic action. Egypt can enhance its competitive position by investing in improving product quality, ensuring compliance with international standards, and streamlining supply chains to reduce costs.”

“Additionally, leveraging existing trade agreements, such as the Qualified Industrial Zones (QIZ) agreement, can provide tariff advantages. By strengthening partnerships with U.S. importers and focusing on sectors where Egypt has a comparative advantage, such as textiles and agricultural products, the country can increase its market share in the United States,” according to ElWakkad.

A Hybrid Trade Strategy for Enhanced Economic Resilience

Considering the recent changes and the challenges or opportunities they may offer, there are several measures that need to be implemented. According to Qasim, removing export barriers, improving customs, taxation, and port logistics, and creating a positive production and investment climate are key state actions that can catalyze greater competitiveness.

Meanwhile, ElWakkad explains that “Egypt can mitigate the impact of Western tariffs by strengthening its engagement with regional trade blocs like the African Continental Free Trade Area (AfCFTA) and the Common Market for Eastern and Southern Africa (COMESA). These platforms offer access to new markets and can help diversify export destinations, reducing reliance on Western economies.”

ElWakkad continues, pointing out that “the recent shift towards protectionist policies by major economies indicates a move away from multilateral globalization towards regionalism. In this context, adopting a hybrid approach that combines selective protectionism to safeguard key domestic industries with strategies aimed at export diversification can enhance economic resilience. This balanced strategy allows Egypt to protect its economic interests while exploring new growth opportunities.”

The recent US tariff impositions serve as a stark reminder of the evolving and often unpredictable nature of international trade. For Egypt, the immediate aftermath presents a period of assessment and strategic planning. While the direct impact of the 10% tariff may be manageable, the broader implications for global supply chains and the potential for further protectionist measures demand vigilance.

By Sarah Samir

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