On April 2, 2025, President Donald Trump's much-anticipated appearance captured the world's attention. When the figures were released, a sense of relief was perceptible in countries such as Egypt and Morocco, judging by the tone of the editorials in these countries' press and exporters' reactions. Moroccan and Egyptian exporters are only affected by a 10% increase in customs duties, which they saw as a "privileged position". This is the same tariff also imposed on the Arab countries of the GCC, while the rate has exceeded 20%, 30%, and 40% for the rest of the Arab countries, such as Tunisia, Algeria, and Iraq.
Khaled Al Sayed, Egyptian economic analyst and author of the Hakawi fi Elbusiness column dedicated to monitoring trade and currency dynamics, comments on how the tariffs have been received in Arab countries and their impact on exporter morale, especially in the agribusiness sector.
© White House
On the day the tariffs were announced, initial panic quickly gave way to relief in Egypt and Morocco, as exporters saw in them an element of opportunity. Al-Sayed comments: "I would say these professionals are right to express this relief. As the 10% tariff is much lower than tariffs imposed on other countries, it gives Egyptian and Moroccan exporters a short-term advantage. The opportunity element is there, and this appeal seems reasonable. But it ignores some hard facts, like, as everyone knows, that the Trump administration is often unpredictable and can revise the tariff rates on any given country once exporters in that country benefit from the situation."
The new tariffs could give an advantage to exports of several agricultural products of Egyptian and Moroccan origin. According to Al Sayed, many examples of products with high demand and low elasticity could react positively: "Fresh produce such as Egyptian grapes and Moroccan citrus fruits could retain their market share as these products are already established in the American market. However, price-sensitive products could lose ground to Latin American suppliers. Much will depend on how competition in Latin America, where tariffs are also 10%, reacts to the new situation. There's also a critical factor we need to keep in mind, and that's logistics efficiency: even with lower tariffs, shipping costs and delays could erode the advantage".
According to Al-Sayed, the configuration of global competition after the new tariffs could open the door to fresh produce that has been totally absent from the American market until now, such as Egyptian citrus fruits, which can take market share from Mexico. Another example is Moroccan avocados, so far absent from the American market, but tariffs imposed on Mexico could provide a boost to opening up the U.S market.
These theoretical effects will depend, above all, on the tolerance of the American consumers to the price increase. This is a test that Moroccan citrus exporters were able to avoid this year, as the season has just ended. But the Egyptian grape season, about to begin, will show the barometer. Al-Sayed says: "We'll see who bears the burden of the new tariffs, American consumers or Egyptian and Moroccan exporters. Currency dynamics and negotiations with buyers will determine who bears the burden in the long term. In the short term, exporters may absorb some of the cost (through lower margins) to retain contracts, particularly if the dollar is strong. But in the long term, prices will only rise if tariffs are permanent and U.S. importers pass on the costs to consumers. However, we have to take into account the devaluation of the Egyptian and Moroccan currencies as a wild card that can offset the customs duties".
One of the most anticipated effects of the new U.S. tariffs and the ensuing global trade war is the devaluation of local currencies. The situation is different in the two countries, despite the fact that both have embarked on exchange rate liberalization reforms in recent years. Al-Sayed explains that "Egypt's currency is vulnerable, while Morocco's diversified economy and trade links with the EU provide a buffer. The overall impact in Arab countries depends on export dependency. In other words, Egypt presents the highest risk, as it is already struggling with foreign exchange reserves and a USD deficit on the black market, and tariffs could put further pressure on the EGP if exports fall. Morocco, meanwhile, has the luxury of lower risk as its currency is more stable, but a prolonged tariff could hurt the MAD if agricultural exports fall, as they account for a large proportion of its GDP. Other Arab countries like Tunisia are even more exposed to the risk of devaluation."
The days following the announcement of the tariffs set the tempo, with China and the European Union imposing retaliatory tariffs, suggesting that the world has already entered a trade war. The countries of the Arab region, however, seem to be on the sidelines. Al-Sayed says, "Egypt, Morocco, and GCC states will most likely avoid escalation, as retaliation is counterproductive and unnecessary. These are countries that prioritize U.S. alliances for security over trade disputes." It remains to be seen how existing mechanisms, such as the free trade agreement between Morocco and the USA, will be challenged.
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Khaled Al-Sayed
Hakawi Fi Elbusiness (Business Stories)
Email: Khaled.eg@gmail.com