Who wins from Trump’s new tariff regime? Well, maybe Egypt

Industries exporting Egyptian goods to the United States are to pay 10 percent import duties under the new tariff regime United States President Donald Trump announced on Wednesday in an escalation of his global trade war.

The new tariff rates impact over 180 countries and represent the latest maneuver in the economic offensive Trump launched during his first minutes in office, slapping Canada, Mexico and China with tariffs to challenge their competitive markets..

While commentators and economists near and far described the new rates as arbitrary, Trump said the decision, which came into effect on Saturday, was a “declaration of economic independence” for the US.

How is the decision set to impact Egypt?

Industry figures and analysts who spoke to Mada Masr said that the impact of the decision could be minimal for Egypt’s trade with the US, which accounts for a relatively small share of its export balance anyway, and could even be bolstered by the change given some of its competitors are now subject to higher tariff rates.

What does Egypt export to the US?

Egypt’s exports to the US represent only around five percent of its total export volume, worth around US$40.4 billion.

Egypt exported $2.5 billion worth of goods to the US last year, a 6.7 percent increase ($159.1 million) over 2023, according to official US data.

Around half of that export volume came from Egypt’s textile and apparel  industry.

How hard will the tariffs hit Egypt’s textiles and ready-made garment industry?

According to people in the industry, most of Egypt’s exports in the sector are subject to special trade agreements that could support the country in evading the new tariff rate, or, even in the worst-case scenario, still enable the industry to navigate the changes with relative ease.

Mohamed Qassem, the head of the Egyptian Exporters Association, told Mada Masr that a majority of the country’s garment exports are currently exempt from all US tariffs since they fall within the Qualifying Industrial Zones (QIZ) protocol — a 1996 scheme introduced by US Congress to promote economic cooperation among Egypt, Israel and the US. 

Under the protocol, companies operating in designated industrial zones in Egypt are granted duty-free access to the US market as long as their product includes a minimum 10.5 percent component sourced from Israel.

The US has not said whether its new tariffs will impact special trade frameworks such as the QIZ.

But Federation of Egyptian Industries board member Mohamed al-Bahy is confident that such frameworks will not be affected, since agreements like the QIZ protocol are designed as part of clear political frameworks.

“Dropping one of the terms of the agreement could mean its complete nullification,” Bahy explained to Mada Masr.

Qassem was less certain, however, saying that his association will attempt to confirm if the new tariffs will affect companies operating under the QIZ program over the coming days.

“We need to communicate with the US Embassy in Cairo and the Egyptian Embassy in the US to confirm whether these tariffs will be imposed on Egyptian ready-made garment exports under the QIZ agreement,” Qassem said.

If the new 10 percent rate is imposed, the conditions would represent an even greater incentive for Egyptian companies to adhere to the requirements of QIZ, since, without it, clothing exports would be liable for existing tariffs levied on all apparel imports to the US, which averaged  around 14.5 percent in 2024, according to data cited by Reuters.

But even so, Egypt’s clothing industry would retain a competitive edge, according to Qassem, who pointed to the higher tariffs stipulated for countries such as Bangladesh under Trump’s new decision.

During the “Make America Wealthy Again” presser, where Trump revealed the new tariffs, he announced rates ranging from 49 percent for Colombia and 46 percent for Vietnam to 10 percent for many countries in the Middle East.

Former head of the Ready-Made Garments Export Council Magdy Tolba agreed that Egypt will be relatively unaffected by the new tariffs, telling Mada Masr that the situation could instead represent an opportunity to expand the country’s exports to the US.

“I personally started receiving requests to increase exports from my clients in the United States yesterday,” Tolba said.

To truly boost trade, however, industry figures have long sought amendments to the QIZ agreement to reduce the required Israeli component to around eight percent.

“Israel doesn’t actually produce what we need, which forces me personally to import components that pile up in warehouses to comply with the agreement’s requirements,” Tolba explained.

“Successful negotiations with both the Israeli and American sides would have allowed Egyptian exports to the US under the agreement to rise to levels much higher than the current situation,” he added.

What about the impact on the rest of Egypt’s economy?

Beyond the QIZ program, the set of US decisions that sparked panic and huge losses on capital markets last week are set to impact Egypt in a number of ways.

Anticipating a general decline in global trade, energy prices have plummeted, with Brent crude dropping four percent in the wake of Trump’s announcement.

Lower energy prices are to Egypt’s benefit, an economic analyst told Mada Masr on condition of anonymity, noting that Egypt has once again become a net fuel importer over the last few years.

Higher inflation rates in the US amid greater scarcity in the wake of the sudden tariff regime’s imposition, however, could represent an indirect threat to Egypt’s economy.

If the Federal Reserve moves to raise interest rates to curb inflation, said the analyst, it would make returns in the US more attractive to investors, potentially prompting yet another outflow of “hot money” as investors pull their portfolios out of emerging markets, including Egypt.

Washington took the first steps in escalating its trade war by imposing tariffs on Canada and Mexico in February, a move Trump said was necessary to protect the US economy from “unfair trade practices.” The tariffs were quickly expanded to include China, the US’ largest competitor, with a 34 percent tax on Chinese goods.

The decision is likely to lead to a rapid rise in prices, especially in import-dependent sectors such as agriculture and electronics. In turn, US companies may be forced to pass the cost on to consumers or seek local suppliers, permanently altering global trade patterns.

International reactions began to pile up within hours of Trump’s announcement, with some countries immediately retaliating and others seeking negotiations. 

European Commission President Ursula von der Leyen said the EU, which faces a 20 percent rate, would seek negotiations first and countermeasures if negotiations fail. 

Canadian Prime Minister Mark Carney announced immediate countermeasures, while China responded with a matching 34 percent tax on all US imports, effective April 10.