US-China trade war: How will it impact the Middle East?

The possible impacts seem to change as frequently as the headlines, which themselves change as frequently as the current US leader’s position.

In other words: predicting how the ongoing United States-China trade war will affect the global economy – including economies in the Middle East – is not easy.

But there are some things that seem to be consistent. For one, the governments in control of the world’s two largest economies have long been at odds with each other, leading to a fundamental distrust. Yet they’re major trading partners – they both need each other to buy each other’s goods (and given they’re the two largest economies on the planet, the world needs them to be trading with each other to keep every other economy going, too).

Analysts writing for the likes of IHS Markit, The Washington Post, The Los Angeles Times, CNN, South China Morning Post and others all basically say there will be “no winners” if a trade war drags out.

But the US and China slapping increasingly higher tariffs on each other’s goods means other nations could potentially benefit from gaps in the market – that’s the theory of a report by the Munich-based ifo Institute.

Europe could particularly benefit, according to the report, as both the US and China still require a vast number of imports to keep their enormous economies going.

“If the barriers are higher between China and the US, they trade less with each other,” said ifo researcher Marina Steininger in an interview with German news outlet Deutsche Welle.

“But the demand for intermediate products to produce in China (and also in the US) would remain. So, they would look for third countries to buy the products they previously bought from each other.”

The Middle East could stand to benefit as well, as no matter what, the US and China still need oil. But there could be issues if the trade war drags out or heats up to the point that the US and Chinese economies contract and reduce their oil imports.

Another factor that experts point could ensue due to the trade war is a shift in manufacturing facilities by companies that are looking for safe havens.

As those companies look to other countries to make their goods in, the Middle East could stand to benefit if they decide to choose the region as the place to build factories in.

A test case is the US maker of bags and travel accessories Litegear moving operations out of China to the South-East Asian nation of Cambodia.

At this point it’s rather cliché, but with news concerning the US’ apparent policy positions seemingly coming out of the blue on a daily basis (a recent example: the serious interest by US President Donald Trump in buying the entire island of Greenland from Denmark), knowing what might happen in the trade war is impossible to predict.

Perhaps all that companies and individuals in the Middle East can do is hope to weather the storm.