Fitch: US tariffs will place a significant burden on indebted emerging markets

Fitch Solutions believes that the new tariffs imposed by the United States will have a limited impact on the Middle East and North Africa region, particularly the Gulf Cooperation Council (GCC) countries, but will place a significant burden on debt-laden emerging markets.

The report stated that the region’s exports will not be directly affected by these tariffs, but the impact will be felt through higher oil prices and increased inflation rates. Fitch explained that the countries most affected will be Egypt, Jordan, and Lebanon, given their heavy reliance on external debt. These countries will face additional pressure due to the global strength of the dollar.

The report explained that the effects will be indirect in Egypt, as exports and foreign trade will not be directly affected. However, the country’s high debt and the appreciation of the dollar will put pressure on the Egyptian pound, which could hinder the decline in prices and the decline in inflation rates. These factors may also negatively impact expectations of monetary easing in the Egyptian market, especially in light of high interest rates (Arabian Business). The report added that economic growth in Egypt could be affected by these factors. Continued high interest rates in the United States could lead to foreign investors turning away from debt instruments in emerging markets, including Egypt, which could result in some foreign capital leaving the Egyptian market.

The report added that countries with high debt will face greater difficulties with the continued strength of the dollar, which could lead to a resurgence in inflation rates in these countries.

This comes as the United States has decided to impose new tariffs. US President Donald Trump raised tariffs on Chinese goods to 20% and imposed 25% tariffs on all imports from Canada and Mexico. These new tariffs are set to fully take effect by April 2.

At the same time, high tariffs on all steel and aluminum imports into the United States officially took effect, prompting Canada and the European Union to impose retaliatory tariffs. Analysts stressed that these measures will likely lead to higher prices for consumers, even if importers absorb some of these costs. Earlier, China confirmed that it would file a formal complaint with the World Trade Organization regarding the tariffs imposed by US President Donald Trump and would take countermeasures to protect its rights and interests. The official Chinese news agency, Xinhua, described the US decision as a “wrong move,” amid concerns about an escalating trade war and its negative impact on global economic growth.

China also expressed its strong dissatisfaction and categorical rejection of the US decision to impose an additional 10% tariff on Chinese goods, according to the Chinese Ministry of Commerce.

It is worth noting that before Trump took office on January 20 of this year, the International Monetary Fund warned that retaliatory tariffs could hinder economic growth prospects in Asia, leading to increased costs and disruption to supply chains, despite the Fund’s expectations that the region would remain a major engine of growth in the global economy.