View / Why the Gulf benefits from Trump’s trade policy

US President Donald Trump’s aversion to trade deficits is a defining feature of his foreign policy, one that serendipitously favors the Gulf because the US runs a significant trade surplus with each country in the region. It allows them to focus their White House diplomacy on mutually beneficial interests, bypassing the fractious issue of how to manage trade.

With a worldview driven by pragmatism rather than ideology, Trump has made an exception with trade deficits. He hasn’t stated his end goal, but it seems he expects the US should run a merchandise trade surplus with each country. Otherwise, tariffs will balance it out, straining relationships and focusing diplomacy with Washington on trade to the detriment of other issues.

Trump’s approach is nominally consistent with the mercantilist paradigm of 16th-18th century Europe, which viewed trade surpluses as a way of hoarding wealth in the form of physical currency and of building up domestic production capabilities. Both would then help a country wage war and pursue imperial expansion. This fundamentally zero-sum calculus is one that Trump clearly holds in the 21st century, and one that has ensnared the world in a trade war.

Gulf countries have avoided this fate: the US operates a substantive merchandise trade surplus with each of the region’s six countries, allowing them to avoid the negative rhetoric and the worst of the tariffs from Washington. Bahrain and the UAE, for example, have managed to strike defense and investment deals with the White House at a speed that would have been impossible had they needed to eliminate a chronic trade surplus with the US in tandem.

This was a lucky break. Gulf countries did not plan to have a trade deficit with the US, simply because no government has pursued such a strategy since the second half of the 20th century. While the list of flaws in transplanting mercantilist thinking to 2025 is long, one of the most obvious ones is that it ignores trade in services, an equally valid source of foreign currency.

More importantly, a mercantilist-inspired goal of a trade surplus is incompatible with efforts to attract foreign direct investment (FDI): if you sell more than you buy, then people don’t have the currency they need to invest in your economy. In the 17th century, FDI made a trivial contribution to global economic activity, making the tradeoff unimportant. In 2025, wooing global investors is a central element of the Gulf’s economic strategy, with the UAE being the exemplar.

Trump’s tariffs have so far failed to meaningfully shrink bilateral trade deficits, and have even increased them in certain cases. It’s too early to forecast a definitive trend, given that some of the widening is due to retaliatory tariffs imposed on US exports that Trump aims to eliminate via negotiations. As prices begin to rise and hiring slows in the US, the Gulf’s good fortune is clear: it avoids trade tensions and gains Trump’s support for its strategic investments in the US.

Geopolitical experts analyzing Trump’s foreign policy have interpreted his actions as being driven by a desire to bifurcate the global economy and economically isolate China. What they have underemphasized is the role played by Trump’s idiosyncratic fixation on trade deficits, seemingly born out of a neo-mercantilist mindset.

In a global landscape marked by rising economic nationalism, Gulf countries have found themselves aligned with Trump’s ideological leanings, reaping diplomatic and economic gains not through strategic design, but from the good fortune of being on the right side of his trade deficit obsession.

Omar Al-Ubaydli (@omareconomics) is the Director of Research at the Bahrain Center for Strategic, International and Energy Studies (Derasat), and a contributor to Semafor.