The risks and opportunities awaiting the Egyptian economy in the wake of the ongoing global trade wars were the topic of discussion last Thursday during a meeting between Prime Minister Mustafa Madbouli and members of Egypt’s Coordination Committee for Fiscal and Monetary Policies and of the Macroeconomic Advisory Committee.
Members of the latter committee presented different scenarios on how the Egyptian economy could be affected.
The trade policies recently implemented by US President Donald Trump have introduced significant shifts in global trade dynamics, with wide-ranging implications for economies worldwide, Walid Ramadan, general manager of the public policy advisory firm Influence Public Affairs (IPA), told Al-Ahram Weekly.
Trump’s plans include placing tariffs on billions of dollars’ worth of goods imported from Mexico and Canada and China and the EU. “If they charge us, we charge them,” Trump said last week, indicating that tariffs will be imposed on countries that impose duties on imports from the US.
A similar trade war took place during Trump’s first period in office. Back then, countries like Egypt, not directly involved in the conflict, experienced indirect effects, encountering shifts in trade flows and price volatility, said a recent paper issued by the Egyptian Centre for Economic Studies (ECES) titled “Caught in the Crossfire: Assessing the Impact of the US-China Trade War on Egypt’s Economy.”
Mohamed Fouad, a member of the Macroeconomic Advisory Committee and co-author of the ECES paper, told the Weekly that he does not see the trade war affecting Egypt drastically. However, he said that it will create an environment that could make it difficult for Egypt to achieve the GDP growth rate it aspires to.
Egypt’s GDP growth is propelled by government spending and consumption, and not by foreign direct investments (FDI) or exports, he noted, and this will minimise the effects of the war. However, the GDP growth could be affected by the fact that the crisis could impact the Government’s ability to accrue debt and access the international debt markets, which will mean that it will not be able to continue growth fuelled by government spending.
Moreover, current efforts to change the structure of the economy and to attract the private sector and FDI could also be hampered by the risk aversion of investors in the face of uncertainty, he added.
According to Fouad, “Egypt needs to get a couple of good years with five or six per cent GDP growth in to be able to surpass the current economic situation.”
“We are not approaching this trade war in our best shape… We are still in rehabilitation,” he said, referring to current efforts to reform the economy, which had been badly affected by the Covid-19 pandemic and the war in Ukraine.
Another factor at play is Egypt’s direct trade relations with the US. According to Walid Ramadan of IPA, US protectionist policies could lead to increased competition for access to the American market, making it more challenging for Egyptian exporters to maintain their current levels of trade with the US.
He noted that Egypt’s trade relationship with the US has been growing steadily, with exports reaching approximately $2 billion from January to November 2024, reflecting a 13.9 per cent year-on-year increase.
Textiles, agricultural products, and minerals are among Egypt’s main exports to the US, none of which are currently subject to increased tariffs. However, the uncertain trade environment necessitates caution, Ramadan stressed.
Should the Trump administration introduce broader tariffs on imported goods, Egyptian exports, particularly in the textile and apparel sectors, could be at risk, he pointed out. Changes to trade agreements, such as the Generalised System of Preferences (GSP) which provides duty-free access for certain Egyptian products, could also affect Egypt’s ability to compete in the US market, Ramadan said.
He is also worried about the cascading effects of heightened tariffs among major economies, particularly between the US, China, and the EU, saying they could likely drive up global commodity prices, including for food, energy, and raw materials.
“Egypt, as a net importer of many essential goods, will feel the impact through higher import costs, which could exacerbate existing inflationary pressures,” he said.
Egypt has been suffering from high inflation since 2023. Urban headline inflation recorded 24 per cent in January 2025. Though high, this is a marked improvement on a peak of 38 per cent in September 2023.
Another byproduct of rising global prices and higher imports bills will be increased demand for foreign currency, Ramadan said, placing additional pressure on Egypt’s foreign-exchange reserves.
“Maintaining exchange-rate stability, a cornerstone of Egypt’s economic policy, could become more challenging as the dollar strengthens amidst global trade tensions,” he said.
Delays in interest rate cuts by the US central bank the Federal Reserve also worry Fouad because they could make Egypt’s borrowing on international markets more expensive. The Fed’s rates are also one of the factors the Central Bank of Egypt (CBE) examines when deciding their own policy rates.
The CBE has been implementing a tight monetary policy since early 2023 to control inflation and attract foreign investments in Egypt’s debt market, but this is affecting private investors who are waiting for monetary easing.
However, Ramadan remains optimistic. While Trump’s trade policies present certain risks, they also create opportunities for Egypt to expand its market share in the US.
The ongoing US-China trade war has left gaps in the American market, he explained, particularly in industries where Chinese exports have become less competitive due to tariffs. Egypt can potentially fill some of these gaps, particularly in the textiles and apparel industry, which has seen an estimated $100 million opportunity in exporting men’s and boys’ cotton trousers to the US, Ramadan pointed out.
Similarly, the fertilisers sector, particularly urea, presents a significant opportunity worth approximately $258 million, he added. To capitalise on these opportunities, Egyptian manufacturers must enhance their production capacity, ensure compliance with US quality standards, and improve their supply chain efficiency.
Fouad warned that during the first trade war in 2018, Egypt, along with countries like Ukraine, saw a decline in export opportunities. This was attributed to the relative lack of integration into global value chains and its constrained trade capacity, he said.
Meanwhile, Vietnam was able to capitalise on the crisis and position itself as an alternative manufacturing hub for US imports.
Nonetheless, he said that the Ministers at the helm of the economic portfolio are aware of the challenges and are doing their best to attract the investments and boost the exports that would help Egypt overcome the fallout of the trade wars.
Fouad is also hopeful that Trump may not go through with all his threats and that he may be making extreme announcements simply to create leverage for the conclusion of deals for the US.
Nonetheless, one key strategy for Egypt, according to Ramadan, is to diversify export markets, reducing reliance on the US by strengthening trade relationships with Africa, Europe, and the BRICS group member countries.
Egypt’s emerging role as a BRICS member provides an alternative avenue for economic growth, he noted, as well as for strengthening trade partnerships with China, India, and South Africa.
As global companies seek to diversify supply chains to avoid tariffs, “Egypt could position itself as a favourable manufacturing and export hub.”
* A version of this article appears in print in the 20 February, 2025 edition of Al-Ahram Weekly
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