A tense game of poker

Islam Zween, Argaam CEO

By Islam Zween

In a tense game of poker, two powerful players—China and the United States—are at the table, holding almost half of the world’s economy in their hands.

The lights of the stock exchanges flicker overhead as they eye their cards, a mix of bold bets and uncertain moves.

Chips—symbolizing the stocks in our real world—worth trillions are stacked high, and the atmosphere is charged with a blend of anxiety, fear and exhilaration as investors navigate the volatile market nowadays.

Each player is focused on outsmarting the other, knowing that every decision impacts global markets and everyone’s future.

In this game, it's not just about winning; it's about proving who can stay one step ahead when the stakes are so high.

In the broader context of the global trade dynamics, the disparity in the amount of tariffs imposed by the Trump administration on China compared to the relatively modest 10% tariffs levied on certain other countries, including Saudi Arabia and excluding oil – and of course if they eventually come into effect, reveals that the lower tariffs are more of a diplomatic and less confrontational approach aimed at what President Trump perceives as correcting specific trade imbalances rather than escalating trade confrontation.

But let’s have a deeper look at the US-trade relations in particular if these tariffs enter into effect eventually.

If some of the Saudi exports to the US market would be still subject to this additional 10%, which could lead to a further decline in the already reduced exports.

The trade surplus between both countries implies that the US exported more goods to Saudi Arabia than it imported from the country last year, showcasing the trade balance is in favour of the United States.

But we may start witnessing the coming months some Saudi firms exiting the US export market and the discontinuation of buyer-supplier relationships. They would rather start focusing on other markets in countries with cheaper tariffs like China, Vietnam, India and Brazil.

A similar rationale could apply also to the import market of goods that are imported as whole from the US.

Saudi importers would explore alternative suppliers from local providers and accordingly demand for Saudi-made products may rise, encouraging local manufacturers to scale up production and innovate to meet this growing demand.

And since the Saudi riyal is pegged to the US dollar, any increase in prices in the US due to the tariff war with China and Europe will not be mitigated by currency fluctuations.

This means that Saudi importers will face higher costs for US goods immediately upon the implementation of the tariffs.

As prices increase for a broad range of products—from basic consumables to cars and luxury items—Saudi importers may need to reevaluate their importing and purchasing strategies, gradually and ultimately leading to a decrease in the volume of US goods imported into Saudi Arabia.

And while the oil sector was exempted from the tariffs imposed by the Trump administration, the impact on Saudi Arabia appears limited nonetheless, as the Kingdom has already experienced a significant decline in its oil exports to the United States in recent years.

That said, Riyadh continues to hold significant geopolitical power, capable of impacting global fuel prices for American consumers by adjusting its oil production levels.

The Kingdom has also been intensifying its efforts to boost non-oil exports to reduce its reliance on the energy sector and diversify its economy. The significant growth underscores Saudi Arabia’s commitment to strengthening other sectors and achieving a more balanced economic structure. 

The sure thing is that the global trade landscape has entered a phase of profound uncertainty due to the Trump administration’s protectionist policy, which’s reshaping supply chains and prompting companies to reevaluate their operational strategies.

Paradoxically, this chaotic scene, which was described in recent days by international financial and economic media outlets as a ‘carnage’ and a ‘stampede’, could lead to a more globalized economy, where nations start collaborating to fill the void left by American isolationism under Trump.

Analytical views only. No political position implied.