US President Trump’s threat of 50% tariffs on Indian exports has put Indian businesses set up UAE, Saudi Arabia in a tight spot. With potential duties so high, many companies are considering new strategies to keep their US market share. One key option gaining interest is investing in production facilities in the UAE and Saudi Arabia. These countries face a lower US tariff rate of 10% on exports, making them attractive bases for Indian companies aiming to reduce the impact of high duties.
Indian manufacturers, especially those exporting textiles and garments, could find relocating or expanding production in the UAE or Saudi Arabia a practical solution. The UAE also offers benefits under the Comprehensive Economic Partnership Agreement (CEPA) with India, which reduces import duties for Indian goods. Moreover, the UAE’s free zones allow re-export with minimal or zero import duty, further easing cost pressures.
Companies are increasingly viewing setting up production in the Gulf not just as a transit route but as a base for value addition. This approach aligns with US trade policies that aim to discourage simple transshipment to avoid higher tariffs.Indian businesses set up UAE. Businesses in sectors like perfumery have already experienced smoother exports under the 10% tariff when shipping from the UAE to the US.
While there is still hope that final tariffs on India might be negotiated down from the threatened 50% to around 15-20%, Indian companies dealing with US clients are weighing their options seriously. Investing in production facilities in the UAE or Saudi Arabia could be a strategic move to safeguard exports, adapt to shifting trade policies, and capitalize on regional trade agreements.
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