The tariff drama that has dominated headlines and rattled markets over the past week is likely to have a limited impact on start-ups in the Middle East, although funding might be affected as investors weigh the economic outlook, according to industry experts.
Start-ups in the Middle East, especially in the Gulf countries, are relatively shielded from any trade war repercussions, unless they are directly dealing with the US market, they said.
“Anything that happens anywhere around the world, because we are such interconnected global economies, you would feel the impact,” said Hanan El Basha, managing director of the Founder Institute GCC and a start-ups mentor and adviser.
“I would say that still within the Mena – and specifically within the GCC region – the impact might kind of be filtered through by the time it gets to you. You will feel the impact, but it's not going to be humongous.”
The announcement by US President Donald Trump on Wednesday of a 90-day pause on “reciprocal tariffs” on all countries except China, eased some concerns on Thursday, with global markets rebounding. The move came after business executives warned of a potential recession caused by the Trump administration's policies and some of the top US trading partners retaliated by imposing import taxes.
However, Mr Trump raised duties on Chinese imports from 104 per cent to 125 per cent after China increased tariffs on US goods to 84 per cent. US officials also clarified that the country is maintaining its 10 per cent tariff on nearly all global imports.
The global tariff situation is definitely affecting start-ups, said Franklin Francis, executive vice president of Carbelim, a climate technology start-up that has operations in the UAE, the US, the UK and India.
“As a clean technology company focused on air purification and carbon capture, we rely on specialised components and materials sourced from various regions. Tariff fluctuations have led to increased costs and procurement delays – particularly for high-precision sensors and parts not readily available in local markets,” he said.
“While the UAE’s infrastructure and support systems provide some buffer, our international operations – especially in the US – face sourcing challenges when trying to procure materials from the Middle East. Despite being a local manufacturer in the UAE, tariffs and export restrictions can complicate and increase the cost of supplying our US team with regionally produced components.”
Hassan Elrakhawy, chief executive of Leedana, an agriculture technology start-up that has operations in the region and globally, also said his company is seeing the impact of the tariff uncertainty.
“Tariffs are making people rethink how fragile things can be. Imagine going to the store and there’s no food. Or an apple costs $250. What if Mexico stopped sending food to the US? Or Canada stopped sending fresh water?” he said.
“People are starting to feel this. In Canada, Egypt and the US, we’ve seen more interest from investors and corporations in having food locally – because some things are just too important to depend on from thousands of kilometres away.”
Mr Francis also stressed that the situation highlights the need for start-ups to adapt by localising parts of their supply chain and exploring bilateral trade solutions.
For UAE-based Circa Biotech, a waste management company that produces sustainable aviation fuel and insect protein, the whole situation has meant looking closely at their future plans.
“Very few start-ups are exporting goods that are manufactured locally and destined to be sold in the US market, so the impact is limited,” said Haythem Riahi, chief executive and co-founder of the company.
“However, start-ups with plans to do so – like Circa Biotech – need to assess the situation better in order to understand the specifics of the products involved and to find a mitigation plan.”
However, for UAE-based electric vehicle company Sulmi, the tariff situation is “actually in our favour”, said its founder Rashid Al Salmi.
“We are an automotive technology manufacturer. So, what we do is not white labelling. We don't get [products from the] US, we actually get it either from China or India,” he said. While it would have been challenging if the company had customers in the US, that is now not the case, he added.
Funding pause
One area of impact could be on funding, especially from venture capital firms that might rethink their strategies in light of the current uncertainty.
Middle East and North Africa start-ups collectively raised $1.9 billion in 2024, down 29 per cent annually, according to data platform Magnitt. Saudi Arabia ranked first ($750 million), followed by the UAE ($613 million) and Egypt ($329 million), it found. “Despite the dip in funding, the number of active investors in Mena rose by 20 per cent, signalling optimism for what lies ahead in 2025,” the report said.
In the Middle East, while the direct impact of tariffs may be less evident, the broader economic repercussions could lead to a decline in start-up funding and a more cautious investment environment, said Swethal Kumar, managing director of Catalyst, a cleantech accelerator and investor that is a joint venture between Masdar City and BP.
“This venture capital may shift towards writing small cheques or may delay investment since these VCs also depend on raising capital from institutional investors who are generally large corporates, so they may have exposure to the US market or may have direct impact of tariffs,” he said.
A key factor for start-ups, especially those in the Gulf region, is the support provided by governments and institutions that are advocating for and supporting the entrepreneurial ecosystems, said Ms El Basha.
“They're the ones putting in the policies and the frameworks and the network to be able to support the entrepreneurs and start-ups in the region, and that in itself gives you a bit of protection against kind of any flooding that comes your way,” she said.
However, VCs have a much bigger view since they are aiming for start-ups to expand outside the region.
“We know the market [in the GCC] is not big enough, but they are looking beyond – we have Africa, and we have South-East Asia, and we have Europe. So, we are in this area, which is kind of a sweet spot for start-ups, that they can use the GCC as a launch pad, they can get the support of the frameworks, the policies, the funding, sometimes the governmental and semi-governmental institutions that are supporting them, and then still be able to cross borders and have some entities backing them, so they're not completely vulnerable to the impact of any [economic crisis].”
Globally, however, the “unknowns are too many” for investors, which could cause stagnation in terms of funding for a lot of small and medium enterprises that are aiming to scale, she added.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
ABU DHABI T10: DAY TWO
Bangla Tigers v Deccan Gladiators (3.30pm)
Delhi Bulls v Karnataka Tuskers (5.45pm)
Northern Warriors v Qalandars (8.00pm)
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Who was Alfred Nobel?
The Nobel Prize was created by wealthy Swedish chemist and entrepreneur Alfred Nobel.
- In his will he dictated that the bulk of his estate should be used to fund "prizes to those who, during the preceding year, have conferred the greatest benefit to humankind".
- Nobel is best known as the inventor of dynamite, but also wrote poetry and drama and could speak Russian, French, English and German by the age of 17. The five original prize categories reflect the interests closest to his heart.
- Nobel died in 1896 but it took until 1901, following a legal battle over his will, before the first prizes were awarded.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Publisher: Konami
Platforms: PlayStation 5, Xbox Series X/S, PC
Rating: 4.5/5
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Rating: 4/5
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Touring range: 591km
Price: From Dh412,500
On sale: Deliveries start in October
