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US President Donald Trump took little time to escalate a much-anticipated trade war with China, imposing tariffs of 10 percent on all Chinese goods.

Beijing responded with retaliatory tariffs including on US crude oil and large-engine vehicles, with more tariffs expected over the next four years, setting the stage for another round of economic conflict between the world's two largest economies.

Trade wars have far-reaching global consequences, affecting supply chains, manufacturing costs, and diplomatic alliances, with much of the world feeling the impact, particularly regarding strategic partnerships and economic stability.

However, the Middle East has unique vulnerabilities to these economic tremors and is also caught in the crossfire of the US-China rivalry.

“Under this second term of Trump, we are likely to witness a fundamental change in how US foreign policy operates in the region,” Steven Wright, Associate Professor of International Relations at the Hamad Bin Khalifa University, told ������.

“US foreign policy has shifted to a��personal approach focused on transactional deals as part of an America First approach, from an institutionally constructed one grounded in historical grand strategy. Such change means that all states globally need to adapt.”

Beyond trade, Trump's willingness to impose tariffs on allies - as demonstrated by the temporary levies on Canada and Mexico - and his broader Middle East ambitions, including his recent call to forcibly displace Palestinians from Gaza, highlight his chaotic and unpredictable approach to global policy.

The Middle East finds itself at the crossroads of this conflict, navigating uncertainty between two economic giants without wanting to pick a side.

Caught in the crossfire

Since Trump launched a trade war with China in 2018, Beijing has nevertheless rapidly expanded its economic clout in the Middle East, particularly in infrastructure projects, trade partnerships and energy agreements.

This has ranged from a $400 billion strategic partnership with Iran, investment in GCC green energy projects such as Saudi Arabia’s ACWA power, and an energy exploration deal with Iraq, a country which has relied heavily on Beijing’s investments.

China has also invested in infrastructure projects in countries such as the UAE, Egypt and Turkey while becoming a major trading partner for regional nations.

These deals are part of China’s Belt and Road Initiative (BRI), which seeks to expand Beijing’s economic reach while securing critical supply chains. However, as the US-China rivalry intensifies, Middle Eastern nations may face even greater scrutiny over their economic ties with Beijing.

One of the most pressing aspects of the trade war’s impact on the Middle East is technology access. On one hand, China has become a major supplier of green energy tech to the Middle East, including solar panels, wind turbines and electronic vehicles.

Additionally, semiconductors, AI, and digital infrastructure have become geopolitical flashpoints, and the US is increasingly restricting China's ability to access advanced tech.

"The US export restrictions on advanced semiconductors - coupled with the fact that China can't produce enough advanced AI chips for its own domestic market, and thus can't export, either - means that countries in the Middle East must seek US government approval for ways to import significant volumes of AI chips and build AI-capable datacentres," Chris Miller, economic historian and author of The Chip War, told ������.

"The US government has pushed Middle Eastern countries to limit their ties and investments in China in exchange for accessing US chips," Miller added.

This presents a critical dilemma for Gulf nations that seek to position themselves as AI and tech hubs.

For instance, Saudi Arabia seeks to develop its local AI industry, such as the semiconductor manufacturer Alat Company which was launched in January 2024.

European nations like Germany and France have also invested in the GCC’s AI industries, such as France on 6 February to partner with the UAE to develop a one gigawatt AI data centre.

However, regional countries still depend heavily on US semiconductor technology, meaning that despite their attempts to diversify partnerships, they still need to tread carefully and work around US-imposed restrictions.

Risks for GCC economies

If further tariffs are imposed, their impact on global economies could put the Arab Gulf nations prized economic asset - oil - at risk.

Following Trump’s announcement of new tariffs on China, oil prices fell by 2.6 percent, echoing market concerns that an eventual slowdown in China’s economy could weaken global oil demand.

As the world’s largest oil importer, any disruption to China’s economy would have ripple effects on the GCC countries.

"We can see already some impact on oil prices, as tariffs on Chinese goods are expected to lower demand and hence economic activity in China. The effect is an expectation of lower oil prices globally. This is perhaps the deepest threat to GCC economies," Karen Young,��Senior Research Scholar at Columbia University��in the Center on Global Energy Policy, told ������.

Lower oil prices could also hinder Saudi Arabia’s Vision 2030 ambitions to diversify its economy away from oil, as well as other efforts across the GCC, given the reliance on oil revenues to fund economic diversification projects.

"If these products, including petrochemicals or even EVs or solar panels, were to be destined for a US market, then they might face tariffs. But there is little that is co-produced that travels to the US as an export,” Karen Young explained.

“However, the rising trade tensions certainly put the GCC states in a difficult position vis-à-vis their economic partnership with China, and we can expect those negotiations over high-tech inputs from the US to contain a ‘no China’ carve-out in information sharing and co-investments in state entities that receive US inputs.”

Will Gulf States be forced to pick a side?

Many Gulf nations have pursued a strategy of balancing ties between Washington and Beijing. However, as economic competition intensifies, pressure to choose a side in various partnerships is mounting.

"Gulf states are looking to navigate and manage geopolitical competition and avoid having to pick sides in a pragmatic way. GCC states are looking to take advantage of economic and security opportunities in a multi-aligned world where there are no clear spheres of influence or poles," Karen Young stated.

"They will certainly be under US pressure to sever technology cooperation with China, particularly if they seek stronger defence arrangements with Washington. But that will not limit other strategic investments with Beijing," she added.

China has played a major role in infrastructure projects across the Middle East, particularly in transport, energy, and telecommunications.

"On infrastructure, the Chinese are eager to be the contractors for more projects, regardless of who funds them. Unless they are sensitive infrastructure such as ports, and dual-use facilities, I don’t think they will be significantly affected," Yun Sun, Senior Fellow and Director of the China Program at the Stimson Centre, told ������.

In the past, several Chinese-led infrastructure projects in the Middle East raised concerns and protests from Washington over potential dual-use applications.

In 2019, the UAE's telecom provider, Etisalat, partnered with Huawei to develop 5G infrastructure, sparking concerns in the US. Even so, the UAE deepened its ties with Huawei, announcing multiple deals in subsequent years.

These include port developments in the UAE, where US officials have reportedly scrutinised possible military usage, and Huawei’s 5G networks, which face security concerns over data transmission.

In 2021, the UAE halted the construction of a inside a Chinese-owned port, believed to be a military facility, following pressure from the United States.

Likewise, while Saudi Arabia has deepened its AI collaboration with Chinese firms, it has shown some caution to avoid falling out with the US. In October 2024, the head of King Abdullah University of Science and Technology (KAUST) to limit AI collaborations with China to ensure compliance with US trade regulations and maintain access to US-made chips.

While GCC states will continue to aim to balance between both powers, US pressure may likely deter their ties with Beijing in critical infrastructure sectors.

However, Yun Sun expects that China’s deals with other Middle Eastern countries may face less scrutiny than those with Iran. Indeed, Beijing’s agreements with Tehran are more politically sensitive to Washington due to existing sanctions, which could escalate further if Trump revives his "maximum pressure" campaign against Iran.

A tense balancing act

As the US-China trade war escalates, Middle Eastern countries face a difficult balancing act. While the region benefits from Chinese investment, it relies on US security partnerships and technology access.

There will be other challenges, including the UAE’s BRICS membership, given Trump’s scepticism towards multilateral frameworks, said Dr Wright. He added this could influence other states to act carefully.

Indeed, on 29 January, Trump his presidential campaign threats to impose 100 percent tariffs on BRICS nations should they pursue a reserve currency that replaces the dollar. Currently, Egypt, the UAE, and Iran have joined BRICS, while Saudi Arabia is still considering membership after being invited in January 2024.

However, Dr Wright also suggested that Trump may be more focused on the broader commercial value of China’s economic ties relative to Washington’s, with his primary aim being to ensure the US is not overtaken in that regard.

“While the Biden administration primarily focused on security implications of Chinese tech engagement, Trump's approach appears more focused on the bottom line - the comparative scale of investments,” he added.

“This could actually create more flexibility for GCC states in their technology partnerships with China, provided these engagements don't significantly overshadow US investments in terms of pure dollar value.”

For Gulf nations, avoiding entanglement in great power competition while securing economic growth will be the ultimate challenge, one that will require strategic manoeuvring in an increasingly polarised global economy.

Jonathan Fenton-Harvey is a journalist and researcher who focuses on conflict, geopolitics, and humanitarian issues in the Middle East and North Africa.

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