How US Trade Policy Shifts Are Reshaping Investment and Business Strategy in the Middle East and North Africa

Executive Summary

The United States entered 2025 with an aggressive trade and investment agenda, relying heavily on executive action to impose tariffs, expand export controls, and deploy sanctions and investment restrictions in pursuit of economic and national security goals. The pace of change has been unprecedented, forcing global businesses—including those across the Middle East and North Africa—to reassess supply chains, compliance frameworks, and investment strategies. As the region accelerates its own economic diversification efforts, the interplay between US policy and MENA's strategic position as a trade corridor, energy supplier, and emerging industrial hub will be decisive. This report provides a comprehensive analysis of the 2025 shifts, their regional implications, and what business leaders and investors should monitor in 2026.

Introduction

For decades, the global trade order was built on predictable rules and multilateral frameworks. The Trump administration has fundamentally altered that paradigm, substituting a transactional, leverage-based approach focused on maximizing US domestic outcomes. Tariffs have been deployed at historic levels, particularly against China, while export controls and sanctions have expanded well beyond traditional targets. At the same time, new outbound investment restrictions are reshaping capital flows into sensitive technology sectors. These measures are not isolated actions but a coherent strategy that stresses economic statecraft over diplomatic norms.

For the MENA region, the consequences are multifaceted. The Gulf states, as major trade partners of both the United States and China, find themselves navigating a tightening geopolitical environment. North African economies, with their trade agreements with the EU and ambitions to attract manufacturing, face tariff spillovers and supply chain reconfiguration. Investors and corporations linked to the region must now contend with a more complex compliance environment, where US regulations reach into third-country relationships and payment flows.

Main Analysis

Trade and Investment Policy: A Structural Shift

The administration's trade policy is explicitly protectionist, prioritizing bilateral leverage over multilateral rules. This has manifested in several ways:

• Tariff expansion: Products from China face rates far exceeding initial expectations, with some categories reaching levels that redistribute global supply chains. While implementation of certain increases was postponed or exemptions granted, the signal is clear: reliance on Chinese manufacturing is now a strategic risk.
• Executive action over legislation: Major measures have been implemented via executive orders and emergency authorities, such as the International Emergency Economic Powers Act (IEEPA). This reduces legislative oversight and creates legal uncertainty, as seen in the ongoing Supreme Court challenge to tariff authority.
• Focus on domestic outcomes: Policies are designed to pull manufacturing back to the US, influence currency arrangements, and address perceived trade imbalances. The implications for sourcing and pricing are profound, especially for industries with deep cross-border value chains.

For MENA economies, the shift away from multilateralism creates both risks and opportunities. The region's free trade agreements with the US (e.g., Israel, Jordan, Morocco, Bahrain, Oman) retain their relevance, but the administration's skepticism toward trade deals may limit expansion. Meanwhile, the US-China decoupling is driving companies to seek alternative production locations, and MENA countries are positioning themselves as viable nearshoring destinations with favorable logistics and investment incentives.

Export Controls and Sanctions: Broader Reach, Higher Compliance Burden

Export controls have emerged as a primary tool in the US-China technology rivalry. In 2025, controls expanded to cover semiconductors, artificial intelligence, advanced computing, and related equipment, with new restrictions on supplying these technologies to Chinese entities. The Entity List was broadened to include affiliates, although the implementation of the Affiliates Rule was suspended for one year as part of a bilateral agreement—a freeze that companies should use to prepare for eventual compliance.

The sanctions landscape also underwent dramatic change. Notably:

• Iran: Sanctions remain a central pillar, with heightened enforcement and penalties for non-compliance. Gulf companies, in particular, must scrutinize any transactions that could risk Iranian exposure.
• Russia: While the administration has been cautious about new sanctions, it announced restrictions on two major oil and gas companies in the fourth quarter to pressure Moscow over Ukraine. This has implications for energy markets and for countries like the UAE and Saudi Arabia that maintain diplomatic and economic dialogues with Russia.
• Terminated programs: Sanctions on Syria and the West Bank were ended, signaling a realignment of US priorities but also creating confusion for businesses operating in those areas.
• New focuses: Countering drug trafficking, cartel financing, and other transnational crime has become a sanctions priority, affecting financial institutions and compliance procedures across the region.

For MENA-based banks, exporting companies, and logistics providers, the cumulative effect is a significantly higher due diligence burden. The US government has also built up a backlog on export classification and licensing applications, delaying approvals and increasing uncertainty for companies that rely on timely processing.

Outbound Investment and Supply Chain Restrictions

A newer and potentially transformative area is the regulation of US outbound investment. The Treasury Department's Outbound Investment Security Program now requires notifications and, in certain sectors, outright prohibitions on US investments in Chinese companies developing semiconductors, AI, quantum computing, and other sensitive technologies. This is supplemented by the Foreign Entity of Concern rules under the Inflation Reduction Act, which restrict tax credits for renewable energy components with Chinese ties, and the ICTS supply chain program targeting certain connected vehicles and other tech.

For MENA, these restrictions could accelerate capital reallocation. US investors facing limits on China may direct more funding toward other emerging markets, including the Gulf and Egypt, which are investing heavily in technology infrastructure and innovation ecosystems. Attracting such investment, however, requires that MENA countries align their policies with US compliance expectations and offer clear legal frameworks for intellectual property and data governance.

Tariffs and Trade Remedies: A Litigious Landscape

Tariffs remain the administration's most visible trade instrument. In 2025, the US imposed duties on a wide range of goods, from steel and aluminum to solar panels and medical devices. Section 232 national security investigations have been reopened for critical sectors, and the first joint review of the US-Mexico-Canada Agreement (USMCA) is scheduled for July 2026, potentially providing a template for how the US handles large trade agreements.

The Supreme Court's decision on the legality of IEEPA-based tariffs, expected in early 2026, will have significant consequences. If the Court rules against the administration, tariffs could be struck down, triggering refunds and forcing a reevaluation of the entire strategy. Until then, importers are filing protective refund claims and exploring litigation.

MENA businesses exporting to the US or trading in goods subject to tariffs must monitor these developments closely. The tariff impact is not limited to direct trade with the US; as China diverts goods to other markets, price distortions and trade deflection affect regional competitors. Conversely, some MENA exporters may benefit from favorable tariff treatment under existing FTAs, gaining market share at China's expense.

Regional Impact

Trade Diversion and Supply Chain Reconfiguration

The US-China trade war is a central driver of global supply chain restructuring. As companies adopt 'China Plus One' strategies, MENA is emerging as a candidate for logistics hubs and manufacturing bases. The region's proximity to Europe, Africa, and Asia, combined with extensive free zone infrastructure, makes it attractive for operations serving multiple markets. Countries like the UAE, Saudi Arabia, and Qatar have invested heavily in ports, airports, and rail networks that align with this opportunity.

However, the shift also carries risks. If US tariffs on China lead to a flood of cheaper Chinese goods diverted to MENA markets, local manufacturers may face pricing pressure. Additionally, the region's reliance on Chinese investment and trade, particularly in technology and infrastructure, creates vulnerabilities if US restrictions force US-aligned partners to choose sides.

Sanctions Complexity for Energy and Financial Sectors

The MENA region is a major energy producer and exporter. US sanctions on Iran, Venezuela, and Russia directly shape global oil and gas flows. For Gulf producers, tighter sanctions on rivals can provide market opportunities, but they also complicate international transactions, insurance, and shipping. Banks in the region must carefully manage compliance to avoid secondary sanctions, which can cut off access to US financial markets.

The termination of Syria and West Bank sanctions has altered the operating environment for businesses in those areas, but the broader trend is toward more aggressive enforcement in other areas. Financial institutions are investing heavily in sanctions technology and compliance talent, raising costs but also creating a competitive advantage for those that can navigate the complexity.

Investment Climate and Capital Flows

US outbound investment restrictions could paradoxically benefit MENA as a destination for US capital. With certain investments in China off-limits or heavily notifiable, sovereign wealth funds and institutional investors may look to the region's high-growth sectors, including tech startups, renewable energy, and industrial development. The Gulf's own sovereign wealth funds are also increasing their outbound investments, and they must consider how US regulations apply to their portfolios. For instance, investments in Chinese AI companies could trigger notification requirements if they are made through US-based branches or include US persons.

At the same time, the US is seeking to expand investment ties with trusted allies. The U.S.-Saudi 'Strategic Infrastructure Forum' and similar initiatives reflect a desire to deepen economic integration. Yet, legal uncertainty around outbound rules may cause some investors to wait for clarity, slowing near-term flows.

Strategic Implications

For Executives and Corporate Strategists

• Monitor policy velocity: Trade measures are moving faster than most compliance departments. Companies should establish dedicated trade intelligence functions that track executive orders, BIS consultations, and OFAC guidance on a weekly basis.
• Conduct scenario planning: With the Supreme Court decision pending, tariff impacts could swing dramatically. Executive teams should model multiple outcomes—from full tariff removal to continued expansion—and develop contingency plans.
• Reassess supply chain exposure: Evaluate reliance on Chinese-origin components, as US export controls and tariffs are likely to remain restrictive. Consider alternative sourcing in MENA, India, Southeast Asia, and Eastern Europe.
• Strengthen compliance infrastructure: The expansion of the Entity List and outbound investment rules necessitates robust screening of counterparties, including subsidiaries and affiliates. Invest in automated screening tools and periodic audits.
• Leverage FTAs: MENA-based manufacturers should utilize existing free trade agreements with the US to gain preferential access, positioning themselves as reliable alternatives to Chinese production.

For Investors and Asset Managers

• Scan for reallocation: As US capital seeks alternatives to China, MENA's tech and industrial sectors could attract new interest. Look for opportunities in countries with strong intellectual property protections and stable regulatory environments.
• Understand outbound regulations: If your fund is US-based or manages US-person capital, compliance with the Outbound Investment Security Program is now mandatory. Ensure legal counsel reviews all deals involving Chinese companies in sensitive sectors.
• Participate in trade litigation: For companies paying tariffs, joining protective refund claims can preserve rights if the Supreme Court rules in the government's favor—or if not, may yield refunds later. This is a low-cost option that should be pursued.

For Policymakers in MENA

• Align regulatory frameworks: To attract US investment that is being diverted from China, MENA governments should ensure their regulatory environments meet US compliance standards, including data privacy, export controls, and sanctions enforcement.
• Deepen regional integration: The uncertain global trade environment highlights the value of intra-MENA trade agreements and supply chain connectivity initiatives. The GCC's ongoing customs union discussions and the 'India-Middle East-Europe Economic Corridor' can mitigate external shocks.
• Diversify economic partners: While the US remains a critical partner, governments should continue cultivating ties with Europe, China, India, and other Asian economies to balance their trade portfolios and reduce dependency on any single market.

Future Outlook

Looking ahead to 2026, the trajectory of US trade policy will be shaped by three key variables:

• The Supreme Court ruling: If the Court limits IEEPA-based tariffs, the administration may pivot to other legal authorities, such as Section 301 or Section 232, possibly leading to new litigation. Either way, tariff levels on Chinese goods are likely to remain elevated.
• The USMCA review: The July 2026 joint review could prompt major renegotiation, setting a precedent for how the US treats its largest free trade agreements. MENA countries with US FTAs should watch this closely, as it may signal changes to rules of origin and other provisions.
• National security enforcement: Expect further export controls on advanced technologies, particularly artificial intelligence and biotech, along with heightened scrutiny of outbound investment into other 'countries of concern', potentially including India if tensions rise.

For MENA, these trends suggest a window of opportunity. As supply chains rewire, the region can position itself as a neutral hub—open to both Western capital and Chinese goods, but with increasing focus on value-added manufacturing and innovation. Sovereign wealth funds are likely to accelerate direct investments in sectors that benefit from this realignment, including logistics, digital infrastructure, clean energy, and advanced manufacturing.

However, the risks of over-commitment to either bloc are acute. Governments and businesses must maintain a careful balance, ensuring regulatory compliance without severing ties with critical economic partners. Those that achieve this balance will emerge as more competitive and resilient.

Conclusion

The transformation of US trade and investment policy is not a temporary fluctuation but a structural reorientation of the global economy. The focus has shifted from maximizing global integration to advancing US strategic interests, with tariffs, export controls, and sanctions as primary instruments. For the Middle East and North Africa, this creates a dual challenge: adapting to a more fragmented global system while capitalizing on the opportunities that arise from the East-West divide.

Business leaders in the region must recognize that the era of predictable rule-based trade is over. The ability to anticipate regulatory changes, build compliance resilience, and pivot supply chains will be a key competitive differentiator. Policymakers, meanwhile, must craft strategies that enhance regional integration and foster an investment climate attractive to capital seeking safe haven from geopolitical turbulence.

As 2026 unfolds, the MENA region's response to US policy will shape its economic trajectory for years to come. Those who treat trade intelligence as a core strategic function—rather than an afterthought—will be best positioned to navigate the turbulence and emerge as leaders in the next phase of global commerce.

Key Takeaways

• The United States has adopted a transactional, leverage-based trade policy that relies heavily on tariffs, export controls, sanctions, and outbound investment restrictions.
• US-China strategic rivalry is a primary driver, with MENA potentially serving as a nearshoring and investment destination as companies diversify away from China.
• Sanctions complexity, especially around Iran and Russia, requires MENA businesses to strengthen due diligence and compliance protocols to avoid secondary sanctions.
• The Supreme Court's upcoming decision on IEEPA tariff authority could reshape the trade landscape; companies should file protective refund claims and build flexible pricing models.
• Sovereign wealth funds and investors should monitor outbound investment regulations to ensure compliance when deploying capital in sensitive technologies or dealing with Chinese entities.
• MENA's future competitiveness hinges on deepening regional integration, upgrading regulatory frameworks, and strategically balancing partnerships between the US, China, and Europe.

SEO Keywords

MENA economy, US trade policy, Middle East business, North Africa economy, tariffs, export controls, sanctions, foreign direct investment, economic diversification, cross-border trade, supply chain, investment strategy, sovereign wealth funds, regional competitiveness, trade compliance.

Sources

• Morgan Lewis - US International Trade and Investment: Key Shifts in 2025 and What Businesses Should Know for 2026