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The Gulf has a tricky path to plot between China and the West

It may be clichéd to call the Gulf a crossroads between north, south, east and west, but it is undeniably true

Chinese president Xi Jinping with Arab leaders at the 10th ministerial conference of the China-Arab States Cooperation Forum in Beijing Kyodo via Reuters Connect
Chinese president Xi Jinping with Arab leaders at the 10th ministerial conference of the China-Arab States Cooperation Forum in Beijing

When President Trump was elected in 2024 there was an expectation that relations between China and the US would deteriorate further. Not only was a trade war on the cards – Trump had promised tariffs of up to 65 percent on day one – but further bans on the export of advanced electronics were expected. 

Such a scenario risked leading to competing supply chain hegemonies: one focused on the US and its allies, and the other on China and the emerging markets within its sphere of influence.

However, in the very early days of the administration, Trump appears to have taken a more dovish approach to relations with China.

Although he chose to impose 10 percent tariffs on Chinese imports, this was much lower than many people expected and in contrast with the 25 percent with which he has threatened Canada and Mexico. 

China in return seems to have made a commensurate response without ratcheting up tensions. Even amid the US stock meltdown as China’s DeepSeek – the ChatGPT lookalike – rocked markets, Trump merely said: “The release … should be a wake-up call for our industries.”

This slight thaw in ties can only be good news for the Gulf countries. At the heart of the GCC’s economic strategy has been its development as a nexus point for global and regional flows of goods. It has become somewhat clichéd to refer to the Gulf as a crossroads between east and west, north and south – but it is undeniably true. 

Trump’s protectionist rhetoric has put GCC governments in a difficult position. While they are keen to attract investment and trade from China, GCC members do not want to risk damaging relations with the West. 

Most GCC countries believe their interests are best served by developing a middle way between Western economic and political systems and those in emerging markets. Given the vast potential of markets such as India, Turkey and China, this approach may seem sensible, but it is not risk-free. 

Increasing tensions between the US and China will force many countries to align with one side or the other, making the Gulf countries’ situation difficult.

China’s influence in the Gulf has developed only relatively recently. Up until the 2000s, the Chinese government seemed happy to maintain a position as a large but passive customer of oil and gas products.

However, the past few years have seen it become far more engaged, believing that a more active role will secure energy partnerships, offer good investment prospects and counter Western influence. 

Chinese overtures culminated in 2022, when President Xi Jinping and GCC leaders held a joint summit, setting out a roadmap for future collaboration.

This strategy has been highly successful. Trade between the GCC and China is forecast to pass that of Western economies by 2027.

The region has also become a major beneficiary of Chinese financing. In the UAE, 40 Chinese companies will establish the China-UAE Industrial Capacity Cooperation Demonstration Zone in the Khalifa Economic Zones Abu Dhabi, bringing a combined investment of $10 billion. 

Diminishing Western influence in the Gulf should not be overstated. European and US companies remain the region’s most prominent investors

Chinese port companies have also been active in the Saudi ports of Yanbu, Jizan and Jeddah on the Red Sea coast.

Furthermore, China has become an active investor in the GCC’s many renewable energy projects. In addition to solar and wind, a $5.6 billion electric vehicle manufacturing joint venture has been established in Saudi Arabia.

The evolving relationship must be viewed in the context of diminishing western influence in the Gulf. However, this should not be overstated. European and US companies remain the region’s most prominent investors, and the western powers are significant suppliers and buyers of GCC military hardware.

The US brought some of this influence when it pressured the UAE to rein back ties with Chinese tech companies such as Huawei, fearing that US advanced technology may find its way to China. 

Saudi Arabia’s wariness over joining the China-led Brics group shows that it places considerable importance on navigating the ambiguities between western and emerging market interests.

In contrast, the UAE accepted an invitation to join, highlighting the variance in approaches across the Gulf (and the emerging world) to the new geopolitical environment.

It remains to be seen how Trump’s relationship with China will develop. He may apply tariffs incrementally as a lever to achieve better trade deals or apply political pressure.

However, if he eventually imposes them at punitive levels, it is likely to result in closer cooperation between the GCC states and China as Chinese manufacturers seek new markets and Brics develops as an alternative to Western economic and political systems. 

Either way, the GCC will have to balance western and Chinese interests for many years to come in an increasingly multipolar world.

John Manners-Bell is CEO of Transport Intelligence Insight and founder of Foundation for Future Supply Chain