- Kuwait least exposed: US-bound exports account for less than 3 percent of Kuwait’s merchandise exports, the lowest share among GCC countries in 2025.
- Limited tariff impact: The US tariff increase from 10 percent to 12.5 percent is expected to have a minimal near-term impact on Kuwait and the wider Gulf, with only $5 billion–$6 billion of Gulf goods affected, equivalent to about 0.3 percent of GCC GDP.
- GCC economy faces contraction: Oxford Economics forecasts 5.4 percent contraction in GCC GDP in 2026, followed by a strong 6.8 percent recovery in 2027.
- War disruption bigger threat: The report identifies regional war and trade disruptions, rather than US tariffs, as the biggest immediate challenge to Gulf economic activity and trade.
- Asia offers trade cushion: Asia accounted for about half of GCC exports in 2025, giving Gulf economies alternative markets and flexibility to offset weaker US demand.
Kuwait is among the Gulf economies least exposed to the direct impact of higher US tariffs, with exports to the United States accounting for less than 3 percent of its total merchandise exports, according to Oxford Economics.
The report said Kuwait had the lowest share of exports to the US market among Gulf countries in 2025, leaving its economy relatively insulated from the direct effects of the latest tariff increase.
Oxford Economics said the direct impact on Kuwait, Qatar and the UAE would remain minimal. However, it identified the broader economic repercussions of the regional war and resulting trade disruptions as the biggest challenge facing economic activity and trade across the GCC.
The report forecasts that GCC economies will contract by 5.4 percent in 2026 before rebounding strongly with 6.8 percent growth in 2027. It also expects the recent 2.5-percentage-point increase in US tariffs on Gulf countries, to 12.5 percent, to have a limited near-term impact on Gulf trade.
High-frequency data showed a sharp decline in Gulf exports since February, including shipments to the United States, amid disruptions linked to the war. Before the conflict, Gulf exports to the US had remained resilient despite the tariffs imposed by US President Donald Trump in April 2025.
This resilience supports Oxford Economics’ assessment that the increase in tariffs from 10 percent to 12.5 percent, effective July 24, would not significantly affect Gulf trade or economic growth.
The United States accounted for less than 3 percent of total Gulf merchandise exports in 2025. Energy products represented about half of Gulf exports to the US market but are exempt from the new tariffs, further limiting the region’s direct exposure.
Based on external estimates and US import values for 2024, Oxford Economics estimated that between $5 billion and $6 billion worth of Gulf goods imported by the United States would be subject to the 12.5 percent tariff. That amount is equivalent to only about 0.3 percent of GCC GDP.
The report noted that fuel exports accounted for about half of total Gulf exports to the United States in 2025, while steel and aluminum shipments were already subject to significantly higher sectoral tariffs. As a result, the latest increase mainly affects a relatively small share of non-energy exports.
Exposure to the US market varies significantly across Gulf economies. Bahrain had the highest exposure in 2025, with the United States accounting for 9.3 percent of its exports, followed by Oman at 5.8 percent.
Oxford Economics said Oman could face the greatest direct impact from the tariff increase because it can continue exporting through routes that bypass the Strait of Hormuz, leaving a larger volume of goods exposed to the higher US tariffs.
By comparison, the direct impact on Kuwait, Qatar and the UAE is expected to remain minimal because exports to the United States account for less than 3 percent of their total merchandise exports. Kuwait recorded the lowest exposure among the Gulf states in 2025.
The report also highlighted the resilience of Gulf trade to previous US tariffs. Data following the announcement of the 10 percent “Liberation Day” tariff in April 2025 showed continued trade flexibility, while the US market remained a relatively small destination for Gulf goods.
Oxford Economics expects the latest increase to 12.5 percent to have limited additional effects, particularly because the higher tariffs apply to more than 60 US trading partners. This allows Gulf exporters to remain broadly competitive with foreign suppliers facing similar trade barriers, although competition with US producers is expected to be tougher for non-energy Gulf products.
Non-oil Gulf exports continued to record solid growth following the initial tariff announcement in April 2025 and maintained strong annual growth into early 2026, before the war erupted in February. The report attributed this resilience to the GCC’s reduced dependence on US demand and its strong trade links with Asia and other markets.
Asia remained the GCC’s largest export market in 2025, accounting for about half of total exports, while trade with other Middle Eastern markets also continued to expand. These relationships give Gulf exporters greater flexibility to redirect sales to alternative markets and reduce the risk of weaker US demand weighing heavily on overall exports.
Growing bilateral trade agreements are also strengthening this flexibility, particularly the UAE’s network of comprehensive economic partnership agreements. Since September 2021, the UAE has signed 38 such agreements, of which 18 have entered into force. It aims to conclude negotiations on another five to seven agreements by the end of 2026.
The UAE’s non-oil trade increased 13.1 percent year-on-year in the first half of 2026, while non-oil exports rose 23.9 percent to a record AED 452.8 billion. Oman’s non-oil exports also received a potential boost from its partnership agreement with India, which took effect on June 1, with non-oil exports growing 11.4 percent in the first half of the year.
Oxford Economics warned, however, that the longer-term structural challenge lies in the growing exposure of non-energy sectors to US tariffs. Gulf economies are expanding these sectors as part of their diversification strategies, even as the share of energy in regional exports has gradually declined over the past decade.
The report concluded that higher US tariffs are unlikely to derail Gulf diversification strategies, but could slow efforts to broaden sources of economic growth and gradually reduce reliance on hydrocarbons for fiscal revenues. Trade protectionism therefore represents a medium-term challenge rather than an immediate shock to Gulf economies.
