Inflation

In April 2025, the Trump administration stunned global markets by announcing a sweeping tariff expansion under the International Emergency Economic Powers Act (IEEPA), introducing a flat 10% universal tariff on all imports. This move, framed as a national economic emergency response, immediately triggered global trade uncertainty and diplomatic friction. The policy marked a significant escalation of Trump’s protectionist agenda, signalling a break with multilateralism and targeting long-standing trade imbalances with strategic rivals and allies alike. We found that the United States (U.S.) trade structure is deeply imbalanced, with persistent deficits concentrated in sectors essential to industrial production, such as machinery, electronics, and vehicles. These deficits have exposed the U.S. to retaliatory measures from key trade partners—particularly China, Canada, and the EU—who have calibrated their responses to hit politically and economically sensitive export categories. Tariffs have initiated a multi-channel inflationary shock: direct consumer price increases, rising intermediate input costs, and cascading pressures on logistics and wages. The compounded effect has resulted in a net consumer price index (CPI) increase of approximately 1.2%, with higher spikes in key durable goods. Global supply chains are beginning to reconfigure.   The automotive sector, in particular, has seen disruption in bilateral flows with traditional partners, creating openings for new logistical nodes. The UAE stands out as a beneficiary, attracting redirected FDI and becoming a strategic re-export and final assembly hub. Collectively, these findings underscore a paradox: while the policy aims to reduce dependency and correct trade imbalances, it simultaneously accelerates external retaliation, domestic cost pressures, and global fragmentation in trade infrastructure.

The geopolitical landscape in the Middle East is set for a potentially major shift with US President Donald Trump’s announcement of the resumption of negotiations between the United States and the Islamic Republic of Iran, scheduled to begin on April 12, 2025. Following a period marked by escalating bilateral tensions and the effective dissolution of the Joint Comprehensive Plan of Action (JCPOA), this resumption of dialogue has generated considerable anticipation both within Iran and across the wider region. The initial, albeit potentially transient, positive reactions observed in Tehran’s financial markets, as evidenced by movements in the stock market and gold prices, underscore the profound economic implications these discussions could hold for the Iranian populace. Furthermore, the potential for these negotiations to influence broader regional stability is a matter of significant concern and interest even for the nations within the Arabian Gulf. While the precise modalities of these diplomatic engagements – specifically whether they will entail direct bilateral talks, as suggested by the U.S. administration, or proceed indirectly through intermediary channels – remain subject to clarification, the very initiation of dialogue signifies a notable departure from the recent trajectory of U.S.-Iran relations. This analysis will therefore explore a range of plausible scenarios that may unfold as delegations from the United States and Iran convene on April 12, and consider the salient internal political dynamics within both nations, the prevailing external pressures exerted by regional and international actors, and the specific contextual factors that have contributed to this renewed, albeit cautious, engagement.