US-China face-off: Does the UAE feel the impact?

With the world’s two largest economic powerhouses — the US and China — on a collision course, the impact is bound to be felt across nations, including the UAE. After hurting China with massive tariffs, US President Donald Trump has intensified ‘tech-war’ to keep Huawei, a Chinese global provider of high technology solutions, out of 5G network rollout across the globe. However, the US’ intensive campaign seems to be falling flat as the Chinese tech giant continues to provide services to at least 170 countries, including the UAE.

“Keeping out of the tech war, the UAE has allowed Huawei to open a ‘5G & IoT Joint OpenLab’ in Dubai. The UAE needs the ICT major to smooth operation of the 5G network, internet of things, and big data. ‘Through OpenLab,’ Huawei will work with customers and partners worldwide to develop the best possible industry-specific solutions,” says Wang Su, Vice-President, Huawei, Middle East.
The UAE’s stand on the US-China face-off has been neutral, and it seems to be paying dividends. The US recognizes Dubai’s potential as a hub for innovation and a gateway to global markets; therefore, more than 1,500 US firms have a presence in UAE, from Bechtel and ExxonMobil to Starbucks and Cold Stone Creamery.

The Emirates can use its good offices to lure American technology firms Apple, Microsoft, and Google, who have reportedly looked to move production of their hardware products out of China. The UAE is the US’s largest export market in the Middle East, with more than $19.5 billion in exports in 2018 – the tenth straight year the UAE has held this distinction. The UAE has trade relations with every state in the US, and it’s time to cement them further by creating more opportunities for local businesses. The UAE stands to gain from the economic opportunities arising from the US-China rift.

However, the increasing Chinese presence in the country has made local manufacturers jittery. Chinese manufacturers and suppliers are looking for alternative markets, as the US becomes unviable due to higher tariffs. Considering the supply chain being price sensitive and China’s capacity to make inroads into any market with scale and pricing, local traders are feeling the heat. Chinese consumer goods and apparel have already flooded the market.

The volume of bilateral trade between the UAE and China reached $34.7 billion in the first nine months of 2019, a 6.01 percent increase compared to the same period in 2018. In the first three quarters, China’s exports to the UAE amounted to $23.5 billion, up 9.94 percent, and China’s imports from the UAE were to the tune of $11.23 billion, down 1.36 percent, compared to the same period in 2018. Experts say cheaper Chinese imports have started a price war and could lead to margins dropping below sustenance levels.
Another cause for concern is the collapse of oil prices stirred by the pandemic. If the two economic powers don’t come to terms, experts believe, oil prices are likely to crash further, putting the top oil-exporting countries.

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