Gulf Cooperation Council: Assessing the Effects of United States Tariffs

Recent shift in global trade dynamics, driven by the imposition of US tariffs, have placed the Gulf Cooperation Council (GCC) countries at a pivotal crossroads. This analysis examines the sectoral vulnerabilities and economic performance of the GCC region, focusing on how these tariffs may impact key industries and influence economic stability. The key question faced by leaders in credit and third-party risk is “How do I foresee potential changes in counterparty and supplier risk given the potential impact on my portfolio?” No one has a crystal ball, but it is possible to employ sophisticated modeling techniques to provide forward-looking views that can help mitigate potential risks. This white paper showcases one scenario and demonstrates how utilizing S&P’s proprietary tools can support and mitigate the risks associated with the shifting landscape of global trade.

The US has not only imposed tariffs on major economies like China, Canada, Mexico, and the European Union, it has also signaled potential tariffs on a broader range of countries, adding complexity both to the global trade environment and creating additional challenges for GCC nations in particular. By utilizing tools like RiskGauge™ and the Macro-Scenario Model (MSM) from S&P Global Market Intelligence, risk analysts at non-financial corporations can obtain insights into the resilience of GCC economies, procurement and supply chain teams can mitigate third-party risk by avoiding companies at risk of default, and suppliers can better manage customer risk by focusing their attention on actively managing riskier sectors.

The RiskGauge™ Model evaluates firms’ probability of default (PD) by integrating factors such as financial health, market trends, and socio-economic conditions. This comprehensive approach offers a complete view of a company’s creditworthiness using latest available information, for up to 400 million companies, globally.

The Macro-Scenario Model (MSM) is a powerful complement to RiskGauge™.It provides insights into the potential future evolution of credit risk over multiple years, based on baseline and stressed macroeconomic scenarios developed by S&P Global Market Intelligence’s economists through their Global Link Model (GLM).

Our analysis relies on a hypothetical tariffs’ scenario developed by S&P Global Market Intelligence’s economists, which is based on the following key assumptions:

1. The United States will impose a tariff of 60% on China, 25% on Canada and Mexico, and 20% on the rest of the world.
2. Full retaliation will occur from China, Mexico, and Canada, with energy goods from Canada excluded.
3. The European Union will retaliate on final consumer goods.

The imposition of tariffs, as described in our chosen scenario, may lead to distinctive impacts across companies^[1] operating in different sectors within the GCC over the next one year. Figure 1 illustrates sector risk rankings across the region, using a color gradient from green to red. Green indicates low risk, while red signifies high risk.^[2] The size of each box reflects the proportion of companies within that sector, with a larger box reflecting more observations. These concise visual aids risk managers by clearly displaying industry risk levels amid tariff impacts. Utilities, Construction Materials, Pharmaceuticals, and Real Estate demonstrate resilience and stability despite the future challenging trade environment. Conversely, sectors like Metals & Mining, Energy, and Consumer Products (Non-Durable) may face significant vulnerability due to rising costs and reduced export opportunities. These sectors will require strategic adjustments to navigate the complexities of the evolving trade landscape.

Figure 1: Sector Risk Ranking

Source: S&P Global Market Intelligence as of May 1, 2025. For illustrative purposes only.

Figure 2 compares the RiskGauge™ median PD scores across publicly listed companies within GCC countries.

• Saudi Arabia exhibits strong adaptability and stability, with a median PD slightly improving, driven by strong resilience in key sectors such as Utilities and Real Estate.
• Bahrain maintains commendable resilience and moderate stability.
• UAE, Kuwait, Qatar, and Oman encounter more challenges in adjusting to the tariff pressures.

For example, although sectors like Utilities show resilience in the UAE, the overall higher relative changes in median PD in sectors such as Energy and Capital Goods lead to an overall severely negative impact compared to its regional counterparts.

Figure 2: Relative difference between current and scenario median PD of countries

Source: S&P Global Market Intelligence as of May 1, 2025. For illustrative purposes only.

As the GCC region navigates the complexities brought on by US tariffs, understanding sectoral vulnerabilities by leveraging powerful analytical tools will be crucial for procurement teams and suppliers with exposure in the region. S&P Global Market Intelligence’s Credit Analytics provides appropriate credit risk models and scenario tools to assess current and future uncertainties.

For more information about the models discussed in this analysis, please reach out to us here.

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[1] The analysis includes both public and private companies in the GCC, with a total of 509 public companies and 174 private companies covered in this analysis, all of which have corresponding RiskGauge™ scores.

[2] The color gradient reflects the percentage change in Probability of Default (PD) from current levels to those projected under the scenario.