Last week, US President Donald Trump appeared to initiate a global trade war with aggressive, universal new tariffs. Even traditional partners such as Canada responded with outraged defiance. The latest twist in this roller coaster is his suspension of most “reciprocal tariffs” for 90 days, China excluded.
Is he backing down? No one knows.
The rules of the game, or even what he wants, seem incomprehensible. Confusion isn’t a bug but a feature, arguably the beating heart, of the new policy. Yet radical uncertainty undermines one of the onslaught’s key stated goals: attracting more investments to the US. Investing requires planning, but the indispensable predictability has been obliterated.
There’s little indication of due diligence, or careful consideration, analysis and planning. The sweeping nature of the tariffs, which apply even to uninhabited territories and countries such as Australia with a significant trade deficit with the US, suggest the contrary. The new policy is intended to look and function like a sledgehammer, not a scalpel. The global trading order has been thrown into a bucket and mashed with arbitrary standards.
Global trade will never be the same and invaluable trust is, perhaps irreparably, shattered
These tariffs calculate only trading in goods, not services. That typically favours the US, which exports many services and imports many goods. So now trade is only in goods and not services? How convenient.
Why does the formula purport to identify each country’s trade deficit with the US, divide it by half, and then impose a tariff with a 10 per cent minimum, even if there’s an American trade surplus? Everyone must be smacked, apparently. It’s so arbitrary that changing the years, currently 2024-2025 – from which statistics are usually drawn – to, say, 2020-2025, would often significantly transform the outcome.
Leaving aside supporters of the domestic and international messages supposedly being sent, virtually everyone else is unanimous that none of this makes sense. It echoes former president Richard Nixon’s “madman theory” of diplomacy, making interlocutors believe they are facing an irrational, even insane, US president. Mr Trump might be trying to apply that approach to global trading arrangements, including with allies.
There’s widespread concern about a potential US recession signalled by a negative “bear” stock market. But the current atmosphere is arguably more reminiscent of the comedy/horror film Cocaine Bear, in which a monstrous animal goes on a drug-fuelled killing spree.
Mr Trump’s defenders insist he wants to revive US manufacturing and prevent anyone taking advantage of American generosity. But the imposition of tariffs on countries already running their own deficits with the US renders such claims incoherent.
If Mr Trump is positioning for negotiations, he should at least make his goals intelligible. He has explained that, “to me a deficit is a loss. We’re going to have surpluses or at least going to be breaking even”. But this, too, makes little sense. A trade deficit between states doesn’t necessarily constitute a loss – except from a particularly narrow-minded 17th-century perspective. It’s not a loss to spend for a purpose, such as to manufacture products. It’s just doing business.
Mr Trump keeps repeating that the new tariffs will repair the US budget deficit, with lots of money coming into the country from outside. He still appears convinced that someone other than Americans will pay these tariffs. No one seems to have successfully explained to him that tariffs are taxes on imported goods paid by US companies and consumers, so they can’t alter the amount of money coming into the US treasury from the outside.
Recently in these pages, I tried to outline what Mr Trump’s closest advisers envisioned. But the new tariffs bear little resemblance to what they suggested, so their musings provide little guidance.
Yet several things seem clear enough.
Global trade will never be the same and invaluable trust is, perhaps irreparably, shattered. After the Covid-19 pandemic, the economies of all advanced countries went into tailspins. Under former president Joe Biden, the US pulled off an apparently miraculous “soft landing”. When Mr Trump regained office, he inherited virtually full employment, inflation consistently below 3 per cent with a similar rate of growth in gross domestic product, and a thriving investment environment.
He has taken a sledgehammer to all that, and he concedes there may now be a recession. Indeed, Americans may even re-experience “stagflation”, as in the late 1970s: stagnated GDP growth coupling with soaring inflation. It’s the worst of both worlds, and it would be a man-made disaster and self-inflicted catastrophe of epic proportions.
The US national debt is certainly a significant problem that needs addressing. Much of the annual budget goes to servicing this debt, and, over the long run, that could threaten national solvency. But there are any number of rational, sensible approaches to this challenge.
Mr Trump’s supporters implausibly promise that, under his leadership, the US will grow its way out of debt. It is very hard to imagine that a global trade war will produce ballooning GDP growth.
Instead, even its supporters acknowledge that the tariffs will involve an unspecified period of constriction and pain before the “boom as never before”. American voters are already demonstrating some buyer’s remorse signalled by a stunning blowout in an otherwise relatively obscure Wisconsin Supreme Court election. The Democratic-backed candidate overwhelmingly defeated the Republican, despite more than $25 million in campaign money from Mr Trump’s attack dog against federal civil service workers, billionaire Elon Musk.
Mr Trump is either sprinting to the rescue or on a wild rampage, depending on who you ask, but either way he probably doesn’t have much time. The 2026 midterms may devastate the Republicans, given what everyone agrees is about to hit the US economy.
This is unquestionably one of the most audacious, and arguably reckless, gambles in modern history. Mr Trump inherited, to all appearances, a stable, relatively well-functioning US economy and global trading system. There wasn’t a hint of crisis. Yet he is risking the mother of all self-inflicted wounds.
His 90-day reprieve could be the first pivot in a long, slow turnaround, even on China. It had better be. Otherwise, Mr Trump could plunge the world – and especially his own country – into an abyss.
Either Mr Trump alone can see around corners into spectacular economic expressways that elude everyone else. Or he’s driving us all over a cliff because it’s gloriously thrilling and magnificent to throw the full, unfettered gears of US presidential power into overdrive, gun it, and see what happens.
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
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.”
Results
5pm: Maiden (PA) Dh80,000 (Turf) 1,200m, Winner: ES Rubban, Antonio Fresu (jockey), Ibrahim Aseel (trainer)
5.30pm: Handicap (PA) Dh85,000 (T) 1,200m, Winner: Al Mobher, Sczcepan Mazur, Ibrahim Al Hadhrami
6pm: Handicap (PA) Dh80,000 (T) 2,200m, Winner: Jabalini, Tadhg O’Shea, Ibrahim Al Hadhrami
6.30pm: Wathba Stallions Cup (PA) Dh70,000 (T) 2,200m, Winner: AF Abahe, Tadgh O’Shea, Ernst Oertel
7pm: Handicap (PA) Dh85,000 (T) 1,600m, Winner: AF Makerah, Tadhg O’Shea, Ernst Oertel
7.30pm: Maiden (TB) Dh80,000 (T) 1,600m, Winner: Law Of Peace, Tadhg O’Shea, Satish Seemar
