US tariffs to have limited impact on Oman: experts

While the reciprocal tariffs imposed by the United States of America has a huge impact on the global economy, particularly the emerging market economies like India, Brazil, Africa, Indonesia, Vietnam, Türkiye, Thailand and others, the impact on the Sultanate of Oman is marginal, according to experts in finance, foreign trade and international relations.

Added to this, talks on FTA (Free Trade Agreement) between Oman and the US are ongoing, and the Oman currency is pegged to dollar, hence, the strengthening or weakening of dollar has little impact on the country, making Oman less volatile to the punitive tax reforms announced by US President Donald Trump.

From a financial point of view, a weakening of the dollar will negatively impact the remittances from Oman affecting the money exchanges to a great extent, according to experts.

Speaking to the Observer, Ali Daud, Founder and Chairman of the Oman-American Business Council said: “While recent changes have led to new tariff structures on most goods exported to the US, it's important to remember that the Free Trade Agreement between our two nations remains intact. This is a temporary measure linked to a declared national emergency - not a cancellation of our trade partnership. Even with the 10 per cent rate, Oman remains more competitive than many other countries that face significantly higher tariffs. Smart investors will take the long view. Now is the time to research, assess which sectors remain competitive, and prepare to seize opportunities that others may overlook."

Echoing similar sentiment, Davis Kallukaran, Managing Partner at Crowe Oman, opined that the Liberation Day tariff modifications may not have a direct impact on Oman because of the low tariff rate of 10 per cent compared to other countries where it has gone even up to 54 per cent.

“But the indirect impact may be considerable especially since we are pegged to dollar. To ease the situation many countries may retaliate by devaluing their currencies although it may be damaging to their economies. This may have an impact on the supply chain,” Davis added.

“Another important area of concern for Oman is the oil price which has already gone down and further deterioration cannot be ruled out. Moreover, the increasing cost of debt may have an impact on various ongoing projects. It is also likely that the new project implementations may be delayed due to the current uncertainty in the global market. Also, the world may move from a free trade regime to a protected regime, and I feel it will have a serious impact on trade agreements,” Davis said.

Economic experts emphasised that establishing negotiated frameworks to preserve the trade balances of nations will lead to the stabilisation of global markets following the new US tariffs.

The new US tariffs on imports have cast a shadow over the global economy, imposing rates of 34 per cent on China, 20 per cent on the European Union, and varying percentages on several other countries, while setting a minimum tariff of 10 per cent on all US imports.

Dr Mohammed bin Humaid al Wardi, a member of the State Council, academic and economic analyst, stated that the coming period will be filled with trade tensions and negotiations, which may impact global economic growth. He added that global markets will stabilise once major economies reach negotiated agreements that safeguard their trade balances.

He said that the tariffs imposed by the US will disrupt global trade, particularly supply chains, leading to weaker global economic growth - a concern echoed by the World Trade Organization (WTO), which warned of the risk of a trade war following the new US tariffs. Projections indicate a potential 1 per cent contraction in global merchandise trade volume by 2025.

Dr Yousef bin Hamad al Balushi, an economic expert, pointed out that the primary objective of the US behind its new tariff decision is to restructure the American economic cycle. This aims to enhance domestic investment, bolster the US manufacturing sector, and boost exports, thereby creating numerous opportunities for the US market.

He added that the impact of these new tariffs will be substantial on the global economy, leading to reduced worldwide demand - particularly from major economies such as China and the European Union. This will also have repercussions on fuel demand from these nations, resulting in lower oil prices. Additionally, the new US tariffs and retaliatory measures by some countries will affect global financial markets, with international stock exchanges suffering losses due to investor panic.

He clarified that the Sultanate of Oman, as part of the global supply chain, will be affected by the US tariffs - though to a relatively limited extent, particularly since US imports of oil, gas, and refined products are exempt from these duties. However, the indirect impact will stem from lower oil prices due to reduced global demand and slower worldwide growth.

He noted that opportunities exist for Oman to enhance its appeal to foreign investment and position itself as a supplier to the US market. The 10 per cent tariff rate remains more favourable compared to the significantly higher rates imposed on many other countries. Moving forward, Oman must actively promote its economy as an attractive investment destination.

For his part, economic expert Lo’ay Bataynah emphasised that the imposition of new tariffs is expected to trigger multiple global economic repercussions, most notably a contraction in international trade volume. The increased tariffs will likely slow the movement of goods, particularly between the US and its major trade partners such as China and the European Union. This could weaken global supply chains, drive price hikes, fuel inflationary pressures, and raise import costs - ultimately leading to higher prices for consumers.

He stated that the new US tariffs will reshape supply chains between countries and regions, as companies may redistribute production lines to circumvent the duties. This could generate opportunities for some developing nations while weakening the position of others that rely heavily on exports to the United States.

He outlined the expected global reactions to the US tariffs, including retaliatory measures by other countries - potentially sparking a full-scale trade war harmful to all parties. Another scenario involves negotiations and revisions of trade agreements, particularly free trade deals with the US, as some nations may seek reduced tariffs or exemptions through diplomacy. (With ONA inputs)