Fragmenting global trade order calls on GCC to strengthen strategic autonomy
With the global economy entering a more fragmented, disruptive, and uncertain phase, the GCC region should focus on strengthening its resilience and building more robust supply chains, according to a new whitepaper from KPMG.
The backdrop is clear: the global economy is entering a new phase marked by sluggish growth. At the same time, rising geopolitical tensions and stalled multilateral agreements are fragmenting global trade flows, while supply chain disruptions have become increasingly common.
Countries are also increasingly asserting strategic autonomy through bilateral and unilateral measures. Traditional tools such as export controls, subsidies, technical standards, and tariffs are now being deployed alongside new trade agreements, enabling governments to shape economic outcomes on their own terms.
This resurgence of protectionist measures is seeing many countries often push their own interests and national priorities above those of multilateral-based trading. The US is the most notable example, with President Donald Trump introducing tariff regimes as a negotiation tool to secure – or ‘force’ nations and blocs into – more favorable trade terms.
KPMG’s report highlights that this shift away from liberalized markets comes with a price tag. “Protective industrial policies and reactive counterparty measures have increased policy uncertainty, imposed excessive administrative burden on individual firms, and heightened investor caution. The ensuing impact has led global institutions such as the IMF, the World Bank and the OECD to depress economic forecasts.”
A region that is open to trade
The report highlights that the GCC’s historically open trade model with average tariffs of around five percent has facilitated integration into global markets and enabled broad access to international inputs. This approach has for instance enabled Saudi Arabia to secure the raw materials and machinery essential for its industries, while positioning the UAE as a leading global logistics hub.
While trade openness has stimulated prosperity, it has also made the GCC region significantly dependent on global imports for industrial inputs, which in light of recent developments introduces vulnerabilities to the value chain.
Even with ambitious industrial localization efforts, the GCC sources much of its raw, intermediate, and capital goods from international markets. In 2024, overall trade volume reached an estimated $1.5 trillion, underlining the region’s exposure to global shocks.
GCC’s Response: Strategic Autonomy
While all six member states of the GCC operate under the GCC umbrella, their trade and industrial strategies are diverging, signals the KPMG report. Saudi Arabia is prioritizing industrial localization and building domestic supply chains across chemicals, metals, pharmaceuticals, and renewable energy components in Riyadh. The UAE, in contrast, is deepening its role as a re-export hub by streamlining customs, negotiating bilateral trade agreements, and leveraging its free zones to attract global investment.
While both strategies carry significant merit, “the lack of coordination risks diluting the region’s collective leverage in global negotiations,” states the report.
The way forward should focus on achieving ‘strategic autonomy’, especially in critical sectors. “Strategic autonomy in trade involves the selective use of trade instruments to promote national capabilities, resilience, job creation, and growth. It does not advocate for disengagement, but for policy coherence across trade, industrial development, and regional integration.”
Omar Alhalabi, Partner, Head of Economics and Public Policy Advisory at KPMG, says: “Strategic autonomy in trade is about turning the region’s openness into lasting strength. By coordinating investment in future industries, harmonizing incentives, and negotiating as a bloc, the GCC can build more resilient supply chains, create high-quality jobs, and increase its influence in global commerce. These actions will position the region as a driver of the next phase of trade growth.”
In the report, Alhalabi and fellow lead author Ghassan Elchaarani (Partner and Head of Strategy) lay out several recommendations for how policymakers can build strategic autonomy. These include developing trade policies that reflect and reinforce national strategies, support outbound investment, enhance regional integration, and mitigate high-risk supply chain areas.
The authors also advocate the launch of joint regional industrial projects co-financed by multiple states, and the development of a harmonized incentive framework in the industrial landscape to avoid harmful subsidy competition.
“The next few years will be decisive. If member states act with unity and ambition, the GCC can move from being primarily a consumer of global trade dynamics to actively shaping them, transitioning from a price-taker to a price-maker in the evolving global order,” says Elchaarani.
