In recent days, the streets of Libya have been abuzz with anxiety over a decision to change the exchange rate of the Libyan dinar, coinciding with new U.S. tariffs imposed by President Donald Trump. These tariffs, which have raised concerns among economists about their anticipated impacts, have resulted in a 31% increase in tariffs on imports from Libya. This change comes as part of a broader package of tariffs that Trump has imposed on countries worldwide in response to their own tariffs on U.S. imports.
According to the U.S. Trade Representative, the total trade of goods between Libya and the United States reached approximately $2 billion in 2024. American exports to Libya amounted to $567.2 million, reflecting a significant 27.1% increase from the previous year, while U.S. imports from Libya totaled $1.5 billion, a 4.6% decrease compared to 2023. This resulted in a trade deficit of $898.3 million for the U.S. with Libya, which is a 17.6% reduction from the prior year.
Economic expert Muhammad Al-Shahati addressed questions regarding why Libya was included in the list of countries facing a 31% tariff, alongside major trading partners like China and the European Union. He suggested that while some may view this as a sign of ignorance or hostility from the U.S. administration, the reality is that it is a logical economic decision. The primary goal of these tariffs, according to Al-Shahati, is to prevent Libya from becoming a conduit for re-exporting goods from countries subject to higher tariffs, such as China and certain European nations.
Al-Shahati emphasized that the intention behind the tariffs is not necessarily a reflection of the actual volume of Libyan exports to the U.S., but rather a precautionary measure to curb potential smuggling operations. He noted that the tariffs do not apply to Libyan oil exports, as crude oil and natural gas are exempt from customs duties.
On the other hand, Ibrahim Qarrada, a member of the United Nations Advisory Committee and a Libyan economic expert, expressed concerns about the negative repercussions of the new U.S. tariffs on the Libyan economy. In a post on his Facebook account, Qarrada warned that the average new tariffs of approximately 22% could lead to a price increase of up to 15%, a 5% drop in oil prices, and a 15% rise in the import bill, based on hypothetical estimates.
Qarrada elaborated that this situation could result in higher prices for imported goods such as vehicles and construction materials, while simultaneously reducing oil revenues due to fears of a global recession. He also predicted a decline in economic growth in Libya and an increase in economic burdens, which could exacerbate instability and migration issues within the country.
Furthermore, Qarrada pointed out that the impact of U.S. protectionist policies would be felt in major partner countries like China and the European Union, indirectly affecting the Libyan economy. Although the exemption of oil and gas from tariffs mitigates some of the impact on Libya as a key energy supplier, the growing global economic challenges are expected to have a significant effect on the nation.
In light of these developments, Gulf countries, particularly Saudi Arabia, have emerged as strategic options for re-exporting goods to the U.S. after the imposition of stringent tariffs. Experts in the logistics sector have indicated that the 34% tariffs on Chinese imports and 25% tariffs on the European Union may compel global companies, especially those based in China, to seek alternative routes that reduce costs and maintain competitiveness in the U.S. market.
Dr. Ali Boukhamsin, the CEO of the Center for Economic Studies, noted that Saudi Arabia and Gulf nations possess the necessary capabilities to become re-export centers, citing their strategic geographical location, advanced logistical infrastructure, and influential membership in the G20. In 2024, the value of re-exported goods in Saudi Arabia surged to 90 billion riyals (approximately $24 billion), a 42.3% increase from 63.4 billion riyals in 2023. This growth solidifies Saudi Arabia's status as a regional and global logistics hub.
Economic expert Zaid Al-Buqami stated that the trade agreements between Washington and its partners present an opportunity for Gulf countries to attract foreign investments related to re-export activities. He emphasized the region's unique position, linking three continents and boasting modern ports such as King Abdullah Port and Jeddah Islamic Port.
Al-Buqami further explained that Saudi Arabia's flexible trade agreements reduce the cost of cross-border trade, enabling Gulf countries to serve as assembly and manufacturing points for certain products before re-exporting them. This strategy provides them with a competitive edge against U.S. tariffs.
According to data from the General Authority for Statistics, smartphones topped the list of re-exported items in Saudi Arabia last year, accounting for 27.5% of the total value, followed by ships (13.4%), vehicles (4.3%), and tugboats (3.9%).
However, economist Amad Al-Rashid cautioned that re-exporting to the U.S. will be subject to stringent regulatory frameworks, including safety standards, intellectual property rights, and country of origin requirements. He noted that countries affected by the tariffs might prefer to negotiate directly with Washington rather than circumventing current policies, as the American consumer ultimately bears the brunt of these tariffs.
Nashmi Al-Harbi, a logistics specialist, supported the idea that Gulf countries can play a pivotal role in re-exporting, pointing out that the tariffs imposed on them do not exceed 10%, significantly lower than those on China and Europe, thus creating an economic margin for exploitation. Al-Harbi highlighted the substantial investments Gulf nations have made in their ports, airports, and free zones, which offer attractive regulatory and tax incentives.
Nevertheless, he warned that U.S. customs authorities enforce strict rules regarding the country of origin, which could limit the effectiveness of re-exporting unless genuine manufacturing or assembly operations take place in the Gulf to alter the goods' origin. He added that the re-export strategy might face challenges if Washington tightens its policies or detects attempts to circumvent them, potentially adversely affecting bilateral trade relations.
As the global trade war escalates, Gulf countries find themselves at a strategic crossroads to localize logistics and manufacturing investments that capitalize on the new tariff landscape. However, their success will hinge on their ability to comply with international regulations and devise sustainable solutions.
