The decision by Washington to double tariffs on Indian goods to 50% has triggered alarm well beyond Delhi and Washington. For the UAE, which has become one of India’s most important trade partners under the Comprehensive Economic Partnership Agreement (CEPA), the implications stretch across shipping lanes, factory floors and boardrooms.
The US imported $86 billion worth of Indian goods in 2025, a figure that could shrink by as much as a third next year, according to industry estimates. Textiles, gems, jewellery, chemicals and auto parts are among the categories most exposed. For the Gulf, where Indian re-exports account for a significant share of trade flows, the shock is likely to create both pressure and opportunities.
“UAE-based Indian exporters can’t legally bypass the new US 50% duties just by shipping via a UAE free zone,” said Osama Al Saifi, Managing Director for MENA at Traze.com. Instead, he explains, supply chains would need to be re-engineered so goods meet the US country-of-origin rules as UAE-made.
That means shifting activities such as cutting, polishing or casting into Emirati facilities. Even then, shipments would still face America’s general tariff of around 10%. Any attempt at superficial processing risks attracting penalties, including a new 40% duty on suspected transshipments.
India-US tariff impact
In practice, this leaves exporters with difficult choices: absorb higher costs, restructure their operations in the UAE, or seek new markets. With Washington’s stance hardening and compliance scrutiny increasing, many Indian-owned firms in Dubai and Sharjah are already weighing diversification into Europe, Africa or Latin America.
The disruption is also feeding back into the Gulf’s own sourcing networks. A decline in US demand could initially prompt Indian suppliers to redirect their inventory to the Middle East at lower prices. Al Saifi notes this may create a short-lived dip in costs for Gulf buyers as exporters scramble to offload stock. But the longer-term effect could be contraction in India’s production capacity, forcing UAE importers to consider alternatives in Southeast Asia or Turkey.
Will the prices go up?
For consumers in the Emirates, the inflationary effect may be muted but not invisible. Everyday products with Indian links, including clothing and household goods, as well as certain chemicals, are exposed to supply-chain turbulence. Competitive retail markets and the dirham’s peg to the dollar should keep headline inflation anchored, but subtle price pressures could emerge as inventories rebalance.
What about your next iPhone?
The technology sector faces a more complicated calculus. Electronics and semiconductors were excluded from the tariff list, sparing Apple’s assembly operations and India’s vast IT services industry for now. Yet the uncertainty is unsettling. “This will not add confidence but promote conservative investments,” said William Santo, Chief Technology Officer at Kaiko Studios. While the exemptions shield key sectors, he argues that the unpredictability of US trade policy could deter long-term commitments.
That ambivalence is important for the Middle East, where many technology and outsourcing companies depend on Indian operations. If American restrictions expand, firms may confront higher logistics costs, delayed projects and tighter margins.
“For Middle Eastern companies with operations in India, the tariffs could contribute to logistics disruptions,” Santo noted. “This may pressure profit margins, prompt operational slowdowns, and lead firms to reassess regional supply chains, investment plans, and sourcing strategies.”
Some of those reassessments could benefit the UAE itself. As India grapples with infrastructure bottlenecks and regulatory complexity, investors may look to Dubai and Abu Dhabi as alternative hubs for certain high-value functions. Skilled workers displaced by trade or visa restrictions in India could also add depth to the UAE’s labour market, especially in advanced technology fields.
Still, the underlying story is one of disruption. India risks losing billions of dollars in exports, with analysts forecasting as many as two million jobs at risk. For the Gulf, the immediate effect may be lower prices on diverted goods, but the longer horizon suggests structural changes in supply chains that will ripple through jewellery showrooms, logistics parks and cloud-computing clusters alike.
The UAE has positioned itself as a connector economy, linking East and West. The escalation of tariffs between Washington and Delhi puts that role to the test. Whether Emirati free zones become deeper manufacturing bases, whether importers shift sourcing strategies, and whether tech firms hedge India exposure with Gulf expansion will determine how the country navigates the next phase of trade turbulence.
