Omar’s view
US President Donald Trump is trying to forge a new economic world order. His attempt to redraw the map of global trade — forcing nations to choose between Washington and Beijing — poses a threat to the Gulf, which is deeply embedded in Asian supply chains while tied to American political and security alliances. But the weaknesses of his strategy and the emergence of domestic opposition against it may allow Gulf countries to wait out the storm and continue positioning themselves as connectors between East and West, North and South.
Like most in the American policy establishment, Trump perceives China to be the US’ primary strategic rival. Where he diverges is in the solution. Trump’s plan emphasizes bifurcating the world economy, and making the US-led bloc as strong as possible. A key facet of this strategy is hyperpolarization: countries will have to be exclusively a member of Team America or be exiled to the void, with no fence-sitting.
The Gulf is also being told to make an impossible choice: Decoupling from either the US or China is not just impractical — it’s economically and strategically incoherent.
Most businesses globally and countries would prefer to maintain access to all stations at the international economic buffet rather than being restricted to the US-led bloc: The US and its current and prospective partners are good at producing certain commodities and services, such as technology and finance, but not so good at activities such as manufacturing. Many countries don’t want to restrict their exports to either side.
For Trump’s plan to succeed, he must use a combination of carrots and sticks. For now, he offers only sticks: American businesses and foreign countries will now have to pay a heavy price unless they submit to US plans, which include reindustrializing the American heartland to improve the country’s economic security. Like virtually all countries, the Gulf states have been hit with tariffs equaling 10% or more, in addition to levies on steel and aluminum.
However, there are several flaws in this approach. The most important element is that China has been preparing for this day for some time by significantly decoupling from the US economy. It has cultivated strong economic relations with most countries in the world, and positioned itself at the heart of numerous complex supply chains. As a result, bifurcating the world economy is incredibly painful for everyone, including the US.
The second problem is the legacy of subpar US strategic planning over the last three decades. Historically — most notably in the immediate postwar era marked by the Marshall Plan — the US had a comprehensive foreign strategy that contained coordinated economic and security components. Today, it has deserted the economic elements, instead becoming fixated on hard military power.
China builds bridges, roads, telecommunication towers, trains, and so on, while at the governmental level, the US provides little beyond arms. This situation is worsened by the White House’s decision to gut foreign aid programs. This complicates the US efforts to convince the world to suspend economic ties with China.
Domestically, Trump’s plan is under pressure. The world’s largest economy is teetering on the edge of recession, and the sharp decline in stock prices caused by the first round of tariffs indicates that the business community strongly opposes the new strategy. Trump’s decision to suspend most tariffs for 90 days is a result of this reality check.
For Gulf countries, the optimal strategy is to buy time. For the most part, the tariffs do not have a large direct effect on the Gulf due to the region’s eastward trade outlook, so there is little to be gained from expending political capital with Washington for exemptions. The Gulf is affected indirectly due to lower oil prices or as a result of a global economic slowdown, but this is independent of any decision or action the region can make.
If the region can close ranks and master the art of non-committal diplomatic flattery, there is a chance that something close to the pre-April status will resume, thereby allowing Gulf countries to maintain their high levels of integration with all elements of the global economy.
Omar Al-Ubaydli (@omareconomics) is an affiliated associate professor of economics at George Mason University, senior research fellow at the Mercatus Center in Washington, DC, and a contributor to Semafor.