How US Tariffs on China Are Creating New Trade Opportunities for the UAE

US tariffs on Chinese goods are reshaping global trade flows, creating new export and transshipment opportunities for the UAE. As supply chains diversify, the UAE is emerging as a key logistics hub connecting China with Western markets.

The reintroduction of sweeping tariffs on Chinese imports by the Trump administration in 2025 has reignited global trade tensions, compounding the uncertainty faced by companies with supply chains linked to China. With a flat 10 percent tariff now applied across a broad range of goods and additional punitive measures targeting high-value sectors, the cost of exporting from China to the US has significantly increased. At the same time, scrutiny over transshipment practices through Asian intermediaries has intensified, as Washington moves to close loopholes and enforce stricter rules of origin.

In this shifting landscape, businesses are exploring alternative trade routes and production hubs to maintain US market access while minimizing exposure to rising tariffs. One location gaining considerable attention is the United Arab Emirates (UAE). Positioned at the crossroads of Asia, Europe, and Africa, and equipped with world-class logistics infrastructure, the UAE offers a politically neutral, tax-efficient, and strategically connected environment for reexporting goods.

This article explores how the UAE is emerging as a compelling alternative for companies navigating the fallout of the US-China trade dispute. We examine the evolving US tariff strategy, the UAE’s competitive trade ecosystem, and the models exporters are using to reroute supply chains through the Gulf.

2025 tariff fallout and the GCC economy

Tariffs on Chinese goods have had an indirect but profound impact on the Gulf region. The Trump administration’s broad April 2025 tariff package exempted oil, but slapped duties on many non-oil exports (aluminum, petrochemicals, pharmaceuticals, etc.). After the expiration of the 90-day tariff reprieve on July 9, 2025, the 10 percent duty on all GCC exports (including the UAE) was reinstated. As a result, Gulf exporters must navigate higher costs on US-bound sales.

For example, the UAE’s steel and aluminum sector—historically a top US supplier—is under strain. In 2024 the UAE exported over 347,000 tonnes of aluminum to the US, but with the end of exemptions, its own mines now face a 50 percent US duty (a hike from 25 percent).

Producers like Emirates Global Aluminum are shifting focus away from the US to Europe and Asia. Similarly, petrochemical firms (for instance, SABIC, Q-Chem) have begun redirecting exports to China and India as US orders slow. Even GCC pharmaceutical exporters are adjusting: biopharma companies are deepening ties with Europe/Africa and adopting dual manufacturing (one plant in the Gulf, another in a tariff-free partner) to meet origin rules and lessen US duties.

The broader GCC economy is reacting in kind. Gulf states still hold over US$1.8 trillion in new US–GCC deals (AI, defense, energy) since April 2025, and sovereign wealth funds are pouring capital into “tariff-resistant” industries like semiconductors and green hydrogen. Regionally, free zones are attracting multinationals: Abu Dhabi’s ADQ and Saudi’s PIF report rising interest from companies seeking stable bases in the Gulf with easy access to European, African, and Asian markets.

Global investors are increasingly viewing the GCC as a geopolitical and economic safe haven amid escalating tariff volatility in East Asia and the US. Abu Dhabi and Riyadh’s free zones report rising interest from multinational companies seeking to establish regional manufacturing hubs that leverage GCC stability, favorable tax regimes, and access to emerging African and European markets under new bilateral frameworks.

Nevertheless, the absence of a comprehensive US-GCC trade agreement leaves Gulf exporters exposed to ongoing tariff risks.

Washington’s preference for bilateral arrangements, as evidenced by recent agreements with Vietnam and Indonesia, points to a fragmented approach that prioritizes leverage over multilateral cooperation.

The GCC’s best response lies in accelerating economic diversification and adopting a geographically balanced, sectorally diversified strategy as the global trade landscape continues to shift unpredictably.

US Tariffs on UAE vs. China vs. ASEAN exports (July 2025)

The Trump administration’s 2025 reciprocal tariff policy imposes a uniform 10 percent “baseline” duty on most imports, plus additional levies on selected countries. For example, on Aug 1, 2025 the US announced tariffs of 25 percent on India, 20 percent on Taiwan, 30 percent on South Africa, with a default 10 percent on most other countries.

Existing national-security tariffs (Section 232) have also been raised: as mentioned, in June 2025 steel and aluminum from all countries are hit by 50 percent tariffs. Against this backdrop, UAE-origin goods face the standard 10 percent duty on most categories, meanwhile, recent “trade deals” have set intermediate rates for some ASEAN exporters: Vietnam’s exports to the US are now subject to 20 percent tariffs, and Thailand, Malaysia and Indonesia have negotiated 19 percent rates (down from higher threatened rates).

Comparatively speaking, the largest advantage for the UAE exports lie gaps of electronics, machinery, plastics, textiles.

How US tariffs are shifting incentives toward UAE manufacturing

US tariffs introduced in 2025 have upended global supply chains, unexpectedly benefiting Gulf producers and prompting firms to reconsider where products are made. Most non‑energy exports from Gulf countries (including the UAE) now face only a 10 percent US tariff.

By contrast, many Chinese‐origin goods carry much higher duties: under recent Trump administration policy, Chinese imports effectively incur about 34–55 percent total tariffs (a 10 percent base plus additional 25 percent Section 301 and other levies). These wide gaps mean that identical items – such as electronics or machinery – assembled in the UAE (“Made in UAE”) pay only 10 percent duty, whereas the same products from China or similarly targeted suppliers can face over 25 to 50 percent tariffs. This tariff differential is creating a strong incentive for companies to relocate assembly or processing to the UAE, thereby qualifying goods as UAE‑origin and sidestepping the heavier Chinese duties.

The Trump administration’s reciprocal tariff program treats most non‑Chinese trading partners uniformly: a 10 percent baseline tariff applies to imports from the UAE and other GCC/ASEAN countries. In practical terms, UAE‑made goods (non‑steel/aluminum) bear a 10 percent US tariff. On June 4, 2025, the US raised tariffs on steel and aluminum imports to 50 percent, but this applies to the metal content of any product. By contrast, Chinese‑origin products remain subject to stacking duties.

As noted in our previous article, as of July 2025, the US will continue to impose “a total of 55 percent tariffs” on Chinese goods (a 10 percent general tariff plus 25 percent Section 301 duties and other levies). The effect is stark – for example, a smartphone assembled in the UAE (with sufficient local processing to change its origin) would enter the US at 10 percent duty, whereas the same model made in China would face about a 55 percent rate.

As a result:

• Products “Made in UAE” (non‑metals): 10 percent US tariff (reflecting the standard baseline duty);
• Products from China: roughly 55 percent effective tariff (10 percent baseline + 25 percent Section 301 + 20 percent “fentanyl” tariff); and
• Products from other Asia/GCC countries: generally 10 percent (unless they incorporate Chinese-origin inputs or fall under special tariffs).

Importantly, US customs rules reinforce this outcome. By regulation, Section 301 duties apply only to goods that are products of China. In other words, if a firm can have its goods undergo “substantial transformation” in the UAE (such as, final assembly, finishing, or major processing), US Customs will classify them as UAE-origin, not Chinese. A recent CBP guidance makes this clear: Section 301 duties apply solely on Chinese-origin articles. Thus exporters are racing to add enough local value in UAE free zones (see below) so that shipments to the US qualify as “Made in UAE” – and incur only the 10 percent tariff.

As one commentator puts it, companies must ensure the product is substantially transformed in the UAE in order to legally avoid US tariffs on Chinese-origin goods. While that LinkedIn source is informal, the logic is confirmed by CBP’s official rule that origin (not export or import route) determines tariff liability.

Tariff Incentives for shifting production to the UAE

The numbers illustrate why this matters. UAE-origin goods (non-metal) ship to the US at a 10 percent duty, whereas identical goods from China may face 25–55 percent duties. For example, many electronic and electrical items (smartphones, laptops, circuit boards) are on the US Section 301 list. If assembled in China, they carry an extra 25 percent tariff (in addition to the 10 percent baseline). But if final assembly occurs in the UAE, only the 10 percent UAE rate applies.

A real case in point: an electronics company moved some assembly to Dubai and thus had its goods classified as “Made in UAE,” eliminating a 25 percent US tariff. (While we cannot directly cite that LinkedIn example, it illustrates the strategy.) This opportunity is not limited to electronics: anything from furniture to solar panels could see similar benefits. The UAE’s export data hints at the scope: in 2024 its top re-export categories included electronics, machinery, vehicles, and steel products – precisely sectors where tariff savings could be captured.

Implications for UAE-based exporters

For businesses based in Dubai and other emirates, particularly those trading from free zones, the tariffs necessitate a fundamental re-evaluation of supply chains, pricing strategies, and export destinations. Firms must ensure meticulous compliance with US customs regulations while exploring new sourcing and contract structures to maintain competitiveness.

With global trade dynamics in flux, UAE companies that proactively adapt to the new landscape will be better positioned to safeguard profitability and maintain strong access to North American markets. The country’s agile policy environment and robust trade infrastructure serve as key advantages in this period of adjustment.

The UAE as a strategic transshipment hub for Chinese goods

The UAE has increasingly positioned itself as a pivotal transshipment hub for Chinese goods, facilitating the rerouting of products to global markets, including the United States, to circumvent tariffs and trade barriers. This strategic role has been particularly pronounced following the escalation of US-China trade tensions since 2018. The UAE’s advanced logistics infrastructure, favorable trade policies, and strategic location have enabled it to serve as a critical intermediary in global supply chains.

Surge in Chinese exports to the UAE

Between 2018 and 2024, China’s exports to the UAE experienced a compound annual growth rate (CAGR) of approximately 12 percent, reaching a total of US$65.59 billion in 2024.

This growth trajectory underscores the UAE’s emerging status as a strategic conduit for Chinese goods destined for Western markets. The primary categories of these exports include machinery, electronics, clothing, furniture, bedding, lamps, steel products, and shoes

Re-exports from the UAE to the United States

Concurrently, the UAE’s re-exports to the United States have mirrored this upward trend. In 2024, bilateral trade between the UAE and the US totaled US$34.4 billion, with the US enjoying a trade surplus of US$19.5 billion. This robust trade relationship highlights the UAE’s role in facilitating the movement of goods from China to the US, often through minimal processing or assembly, thereby adhering to US origin rules.

Key product categories: Electronics and electrical machinery

A significant portion of this transshipment involves electronics and electrical machinery. In the first quarter of 2025, the UAE’s electronics exports rose by 45 percent year-on-year, with the United States being the largest importer, accounting for 37.63 percent of these exports . This surge is indicative of the UAE’s strategic position in the global supply chain, facilitating the movement of Chinese electronic goods to the US.

Infrastructure and strategic initiatives

The UAE’s infrastructure plays a crucial role in its transshipment capabilities. The development of advanced logistics hubs and free trade zones (FTZs) has enhanced the country’s capacity to handle and process goods efficiently. Additionally, large projects such as the Belt and Road Initiative (BRI) have further integrated the UAE into global trade networks, solidifying its position as a key transshipment point for Chinese goods .

Why the UAE is gaining attention as a strategic alternative

Strategic Location and Advanced Logistics Infrastructure

The UAE’s geographical positioning at the crossroads of Europe, Asia, and Africa offers unparalleled access to global shipping routes. Dubai’s Jebel Ali Port, the largest in the Middle East, exemplifies this advantage.

With an annual container capacity of 19.4 million TEUs across four terminals, Jebel Ali Port handled 15.5 million TEUs in 2024, marking its highest volume since 2015 . Complementing this is the Jebel Ali Free Zone (JAFZA), a 57-square-kilometer industrial and logistics hub that facilitates seamless re-export operations. These facilities enable efficient transshipment and minimal processing, making the UAE a pivotal node in global supply chains.

Robust diplomatic and commercial ties with both the US and China

The UAE maintains strong diplomatic and commercial relationships with both the United States and China. It is a key partner in US security arrangements in the Gulf, hosting multiple US military centers and cooperating on regional defense initiatives . Simultaneously, the UAE is China’s primary trade and investment partner in the Arab world, with bilateral trade reaching US$101.83 billion in 2024. This dual alignment allows the UAE to navigate complex geopolitical landscapes, offering a neutral platform for trade and investment.

The UAE’s tax and trade environment: A unique competitive edge

Corporate tax regime

The UAE introduced a federal corporate tax (CIT) system in June 2023, marking a significant shift from its previous tax-free status. Under this regime, businesses are subject to a 9 percent tax on taxable income exceeding AED 375,000 (US$102.094,99).

However, entities operating within designated Free Zones can benefit from a 0 percent tax rate on qualifying income, provided they meet specific criteria, such as maintaining audited financial statements and not engaging in activities related to natural resource extraction.

Customs duties and re-export mechanisms

Goods imported into UAE FTZs are exempt from customs duties. Additionally, re-exports from these zones to third countries beyond the GCC are also duty-free. This exemption facilitates efficient transshipment and light processing activities, making the UAE an attractive hub for global trade.

Double Taxation Agreements (DTAs) and Bilateral Investment Treaties (BITs)

The UAE has established a network of 193 DTAs and BITs with various countries, aiming to eliminate or reduce taxes on investment and profits from direct and indirect taxes. These agreements not only prevent double taxation but also provide protection against non-commercial risks, ensuring that profits can be transferred in a freely convertible currency.

Bonded warehouses and economic zones

The UAE offers bonded warehouses and economic zones that allow for light processing activities, such as sorting, repackaging, or assembly, without the imposition of customs duties. These facilities provide flexibility for businesses to manage their inventory and streamline their supply chains, enhancing the UAE’s appeal as a logistics and manufacturing hub.

Strategic models for US-facing exporters using the UAE

Model 1: Assembly or light processing in the UAE

Exporters can establish operations in the UAE to conduct assembly or light processing activities. This approach allows products to meet the “substantial transformation” criteria required for US rules of origin, enabling them to qualify for preferential tariff treatment under US trade agreements.

Model 2: Leveraging the UAE as a logistics and consolidation hub

The UAE’s advanced logistics infrastructure, including ports like Jebel Ali and airports like Dubai International, facilitates the consolidation of goods from various suppliers. This model enables exporters to streamline their supply chains and reduce shipping costs, enhancing efficiency and competitiveness in the US market.

Model 3: UAE-based contract manufacturing with regional supply chains

Companies can engage in contract manufacturing arrangements in the UAE, utilizing local facilities and labor to produce goods for export. This model leverages the UAE’s strategic location and trade agreements to access regional markets, while also complying with US rules of origin requirements.

Sectors such as electronics, consumer goods, textiles, and machinery are particularly well-suited for these models, given the UAE’s infrastructure and trade facilitation measures.

What to watch in the future

Amid rising geopolitical tensions and US efforts to tighten transshipment rules, including two-tier tariff regimes and stricter enforcement of rules of origin, the UAE stands out as a strategically neutral and commercially agile logistics hub. Its balanced diplomatic stance—maintaining strong ties with both Washington and Beijing—positions it as a low-risk base for companies navigating US-China trade frictions. However, exporters utilizing the UAE for transshipment or re-export must closely monitor regulatory developments and ensure compliance with origin and value-addition requirements to mitigate risks.

At the same time, increasing Chinese investment in Gulf infrastructure, particularly in manufacturing and logistics, is reshaping regional supply chains. These developments signal a growing shift toward localized production and re-export platforms within the Middle East, with the UAE at the center of this transformation. To remain competitive and aligned with evolving global trade dynamics, the UAE may need to refine its industrial policies and reinforce its role as a credible and transparent partner in international trade.

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