The United Arab Emirates’ strategic trade partnerships offer a model for countries seeking to shield themselves from rising global protectionism, regional experts said.
As President Donald Trump’s tariffs upend global trade patterns, with trade experts estimating the measures effectively create a nearly $1 trillion trade wall around the US economy, Gulf states are demonstrating how comprehensive trade agreements can help nations navigate an increasingly fragmented international commercial landscape.
The United Arab Emirates’ pursuit of Comprehensive Economic Partnership Agreements (CEPAs) is emerging as a potential model for countries seeking to insulate themselves from the shocks of rising protectionism, according to regional experts.
“The UAE embeds its relations with countries through CEPAs in a way that helps these relationships outlive incumbents, whether they are democratically elected or otherwise,” Dr Khalifa Al Suwaidi, Research Fellow at Abu Dhabi’s Anwar Gargash Diplomatic Academy, told Arabian Business.
“It’s still leader-to-leader diplomacy, which the UAE has been adept at for quite some time, but it’s now morphing into something enshrined in formal agreements that extend across multiple spheres and sectors,” Al Suwaidi said.
Since 2022, the UAE has signed or concluded CEPAs with 27 countries, including India, Indonesia, Turkey, South Korea, Georgia, Malaysia, New Zealand, Kenya, and the Republic of the Congo. These agreements aim to eliminate tariffs, enhance market access, and promote investment across various sectors.
Beyond trade barriers
The UAE’s approach demonstrates a shift from the traditional focus on tariff reduction to what Al Suwaidi describes as “strategic interdependence” – a concept that may offer lessons for other nations confronting the current wave of protectionism.
“It’s not about strategic autonomy anymore. It’s about creating strategic interdependence, because that’s the only way with which we can collectively survive in a world where multilateral action is receding,” said Al Suwaidi.
This interdependence has practical applications. While Trump’s tariffs have targeted major economies including China, the European Union, Canada, Mexico, Japan, and South Korea – with US businesses now expected to pay between $1 billion to $2 billion per day in tariff costs according to CNBC – Gulf Cooperation Council (GCC) countries have largely been exempt, attributed partially to the US maintaining a trade surplus with these nations.
The exemption demonstrates how strategic economic relationships can create diplomatic leverage. After a meeting between Hassan Al Nuaimi, a prominent Emirati business leader, and President Trump, the UAE pledged significant investments in the United States, particularly in artificial intelligence.
“Abu Dhabi is positioning itself strategically with these investments,” noted Al Suwaidi. “This creates a certain amount of leverage because there is a strong personal bond and leader-to-leader diplomacy between the UAE and the US.”
Diversification as protection
For countries facing direct impact from US tariffs, the UAE’s diversification strategy offers valuable lessons, according to Mahdi Ghuloom, Junior Fellow in Geopolitics at the Observer Research Foundation Middle East.
“The UAE’s CEPA strategy has been designed to develop a diversified trade portfolio and become a trade hub,” Ghuloom told Arabian Business. “While Trump’s tariffs are a separate issue, the UAE’s CEPA push reflects foresight and an effort to insulate itself from global trade volatility.”
This approach aligns with the UAE’s ambitious goal of reaching AED4 trillion (approximately $1.09 trillion) in trade by 2031.
“The scale of diversification reduces reliance on any one bloc of markets,” Ghuloom added, noting that when CEPAs proliferate, they help mitigate negative shocks from specific trading partners.
The UAE’s pursuit of bilateral talks with the European Union marks a significant shift from the long-stalled GCC-EU free trade agreement negotiations, which began in the late 1980s. These talks have been confirmed and are set to begin soon. This bilateral approach may prove particularly valuable as the EU faces potential impact from Trump’s tariffs and grapples with what European Central Bank President Christine Lagarde has called an “existential moment” for European economic independence.
Global ripple effects
Despite the GCC’s current exemption from direct tariffs, experts note that Gulf states cannot escape the broader economic turbulence caused by the tariff war.
“In the US, the tariffs are likely to lead to increased inflation and lower economic growth. Considering the importance of the US economy, this could in turn slow down global economic growth,” shipping analyst Niels Rasmussen told CNBC.
Gulf countries import a wide range of manufactured products, many with Chinese components. Higher global production costs can lead to more expensive imports even without direct tariffs. Additionally, as businesses look to circumvent high tariffs, shifts in logistics and trade flows may alter the dynamics of maritime transport — the backbone of Gulf economies.
“The UAE’s CEPAs include provisions on investment, competition, and public procurement. This signals regulatory maturity and strengthens the UAE’s credibility as a destination for long-term investment,” Ghuloom explained.
This comprehensive approach could help offset the potential negative spillovers from global trade disruptions, including inflation pressures and market volatility.
New trade architecture
As countries worldwide respond to the Trump administration’s tariffs with their own retaliatory measures – Canada imposing 25 per cent tariffs on US goods, Mexico announcing similar plans, China implementing additional tariffs and export controls on critical minerals – the global trade architecture appears increasingly fragmented.
In this context, Al Suwaidi suggests CEPAs represent a pragmatic, bilateral approach to maintaining trade flows. “When we engage in CEPA diplomacy, we are also inoculating ourselves against possible drawbacks emanating from tariffs by creating economic partnerships and that notion of interdependence.”
Ghuloom dismissed concerns that CEPAs might create exclusive trade blocs that hinder global commerce. “CEPAs are not mutually exclusive with large trading blocs,” he said, citing examples where countries negotiate both with individual Gulf states and the GCC as a whole.
As the Organisation for Economic Co-operation and Development forecasts that Trump’s tariffs could lead to stagflation in North America, with increased inflation and reduced economic growth, the Gulf’s CEPA strategy may offer a template for maintaining commercial relationships in an increasingly unpredictable trade environment.
Shipping giant Maersk, the second largest ocean carrier in the world, noted in a statement to CNBC that the tariff plan in its current form “clearly isn’t good news for [the] global economy, stability, and trade,” highlighting the urgency for countries to develop trade resilience strategies.
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