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Trump doubles down on energy and trade on first day in job

Donald Trump, flanked by the first lady Melania Trump, Vice President JD Vance and US House speaker Mike Johnson, addressed energy and trade at his inauguration Alexcander Drago/Reuters
Donald Trump, flanked by the first lady Melania Trump, Vice President JD Vance and US House speaker Mike Johnson, addressed energy and trade at his inauguration
  • Donald Trump inauguration
  • Policies will affect Gulf
  • Declares ‘energy emergency’

US President Donald Trump pushed forward with multiple, controversial campaign pledges on the first day of his second term in the White House, including on issues such as energy and trade that are bound to affect Gulf economies.

Ascribing stubbornly high inflation to “massive” government overspending and “escalating” energy prices, Trump declared after his inauguration a national energy emergency that, he said, would enable the US to “drill, baby, drill”.

“We will bring prices down, fill our strategic reserves up again, right to the top, and export American energy all over the world,” the president said in his inaugural address. 

“We will be a rich nation again, and it is that liquid gold under our feet that will help to do it.”

The US is already the world’s largest producer of oil and natural gas, and for six years running has yielded an output of crude that is higher than any other nation’s “at any time,” with nearly 13 million barrels per day on average in 2023, according to the US Energy Information Administration. 

Reducing “burdensome and ideologically motivated” regulatory barriers to further drilling as well as mining – such as by speeding up infrastructure development and making it easier for companies to secure permits – are among Trump’s priorities, according to an executive order he signed on Monday.

The directive also calls for the resumption of US liquified natural gas (LNG) exports, which the former president Joe Biden temporarily suspended last year.

A different presidential decree lays out new efforts to open up more exploration and production opportunities in Alaska, a state that is oil and LNG rich.

Rachel Ziemba, founder of advisory firm Ziemba Insights, said Trump’s race to reduce operational costs for traditional US energy projects would have “mixed” effects.

On the one hand, she said, it may attract new GCC investments in the American market, but on the other hand it may reduce US breakeven costs and, as such, increase competition with Gulf producers.

“Costs of new investment will fall, but demand uncertainty will keep producers in the US from too much new development,” Ziemba said. “Therefore [this is] better for revenues than for production and better for producers than consumers.”

Trump again withdrew from the Paris Accord on climate change “effective immediately,” according to another of the many decrees he signed on his first day back.

Trump annulled 78 Biden-era policies, including ending certain government subsidies for electric vehicles and renewables.

An executive order and fact sheet posted on the White House website say the US government will stop leasing offshore land “to massive wind farms,” which, the documents claim, “degrade our natural landscapes and fail to serve American energy consumers”.

As part of an “immediate overhaul” of America’s framework for international trade, the president confirmed he would establish an “external revenue service” to collect tariffs, duties and other similar levies. 

“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” he said. “It will be massive amounts of money pouring into our Treasury, coming from foreign sources.”

The wide-ranging America First Trade Policy executive order also encompasses a review of multilateral and bilateral trade agreements, export controls on advanced technology, and allegations of currency manipulation by trade partners.

That no countries were formally targeted with tariffs on his first day in the job suggests Trump’s team “bought time for a review” and wish “to take time to iron out inconsistencies”, Ziemba said.

The president, however, told reporters while signing the directive at the White House on Monday evening that the administration is “thinking in terms” of 25 percent tariffs on Canada and Mexico starting on February 1.

LinkedIn/Saud Bin Sultan AlSaud
The Saudi ambassador to the US, Reema bint Bandar Al Saud, was at the ceremony in Washington

The shift away from free trade is expected to have important ramifications for the global economy, including on the competitiveness of Gulf exports, as well as the strength of local currencies and the weight of interest rates.

For the executive orders to become effective, regulatory agencies will have to issue implementing details. In certain cases, Congress might need to write new legislation.

The most controversial of them might quickly get held up in court by fresh litigation. As such, their ultimate timeline and impact remains to be seen.

On foreign policy, Trump claimed he wants to be remembered as a “peacemaker” and “unifier” and that he will measure the success of his administration “not only by the battles we win, but also by the wars that we end, and perhaps most importantly, the wars we never get into”.

The implied reference may have been to Iran – which Trump has indicated would again come under “maximum” sanctions pressure – and the war between Russia and Ukraine.

“I think Saudi Arabia will end up being in the Abraham Accords,” Trump said during an impromptu press conference in the Oval Office.

Kristian Coates Ulrichsen, co-director of the Baker Institute’s Middle East Energy Roundtable, said the speech gave out a strong “America First” and “isolationist” vibe. 

“This opens up possibilities in terms of the transactional approach to policy that was such a characteristic of his first term,” he told AGBI. “Although Trump’s emphasis on unleashing American energy will be noted in other energy-abundant areas, such as the Gulf.”

Trump’s choice to only touch on tariffs briefly in his inaugural address, and barely mention great-power competition with China, “is likely to be something that will be noted and welcomed in regional capitals in the Gulf”, Coates Ulrichsen said.

UAE President Sheikh Mohamed bin Zayed congratulated Trump on X and said he looks forward to working together to “further advance UAE-US strategic relations and promote regional peace and stability”.