The Impact of a Trump Presidency on Dubai and the UAE

US dollar is likely to get stronger by the comeback of Trump in power due to several key economic policies, some of them are laid under:

1.Tariffs on Chinese and Other Imported Goods— A tariff is a tax imposed on the goods being imported from other countries. As a step of protectionism, on one hand, a rising tariff does help in promoting the domestic manufacturers or producers, but on the other hand it lowers the margin of profits for the importers of foreign produced goods.

Trump has plans to introduce higher tariffs which would encourage local production in the US, thereby reducing the need to convert the US dollar to foreign currencies. When the US dollar required to be converted into the Chinese Renminbi would reduce, it would lead to the strengthening of the Dollar.

2. Deportation of Illegal Immigrants—Trump also plans to deport all the illegal immigrants, doing so would lower the amount of remittances to the countries those immigrants belong to. For instance - when illegal immigrants from Mexico will be deported, then Mexico would receive fewer remittances and since less US dollars will be converted to Mexican Peso as a remittance to be transferred, US currency would get further strengthened.

3. Higher Inflation and Interest Rates – Both the above mentioned policies are also inflationary in nature. They would lead to higher consumer prices in the United states as a result of which the Federal Reserve may increase the interest rates again. This would make the US dollar even stronger compared to other currencies in the world.

The policies explained above would also have an impact on the demand potential of UAE to get reduced. Let’s see how it would take place - Ever since UAE Dirham was pegged to the US Dollar in 1997, the country has experienced clear benefits from such a move. This happens because the oil exports of UAE are priced in dollars, so when the value of US Dollar floats, the UAE Dirham being pegged to it also changes proportionately. Thus a stronger Dollar would mean a stronger Dirham

When Dirham gets stronger, it could make Dubai’s real estate and tourism sectors more expensive for investors and visitors from countries like China and Russia. In this way the overall demand potential of UAE would get impacted.

Trump has repeatedly stated that he would have prevented the Ukraine-Russia war and aims to end it quickly. However, his potential lifting of sanctions on Russia could have mixed consequences for Dubai:

• A lot of wealthy Russians have been finding a safe haven in Dubai lately, it makes sense especially with all the sanctions and travel restrictions going on. Dubai's been pretty welcoming when it comes to open doors for the expats. But here's something to think about: when and if those sanctions would get lifted, some of those wealthy folks would head back to Europe, US or Russia. And if that happens, we could see a bit of a dip in their investments in Dubai, both in the property market and in tourism. It's just something to keep an eye on. 
• Sanctions removal would make it easier for Russian tourists to visit Western countries, possibly decreasing their demand for Dubai as a primary travel destination.
• However, the decision to remove all the sanctions cannot be taken by Trump alone as many of those sanctions were imposed by the European Union.

During his first term, Trump facilitated the Abraham Accords, leading to the UAE’s diplomatic recognition of Israel. A second Trump presidency could further strengthen these ties through:

• Increased Military Cooperation—There have been long awaited demands from the UAE for F-35 fighter jets. As we know these demands were held back by the democrats (the ones in power before Trump). These demands would likely see an approval from Trump, enhancing the UAE’s military capabilities. 
• Stronger Gulf Alliances—These approvals by Trump would result in making the Arab Gulf countries and Israel to get stronger militarily and politically, whereas Iran and its allies would likely be weakened compared to them. 
• Impact on Dubai’s Economy—When there will be fewer conflicts around the world and in the Middle-East in particular, this would actually be a bad thing for Dubai and the UAE. This is so because Dubai is considered to be a safe haven, so during the war like scenarios in Iraq or in Libya, a lot of the high net individuals from those particular countries would come to Dubai. This leads to increase spending in terms of both time and money in Dubai, hence when the conflicts decrease, it is bound to hamper Dubai’s economy.

Americans living overseas still have to file US taxes and pay up on the income they earn worldwide. It's kind of a pain, and it definitely makes moving abroad less appealing for a lot of people. Well, Trump's been talking about changing that, like, getting rid of that whole citizenship-based taxation thing. Basically, if he gets his way, Americans living in other countries wouldn't have to deal with that US tax stuff anymore. It's a pretty big deal, and could definitely change the game for Americans thinking about living abroad.

If Trump eliminates this taxation system,

• More Americans may move to Dubai, increasing demand for real estate and business investments.
• Wealthy US citizens could benefit from Dubai’s tax-free environment without renouncing their US citizenship.
• A decrease in demand for second citizenship programs could affect the global investment migration industry.

Trump’s stance on deregulation and increasing oil production in the US could lead to lower global oil prices. The potential consequences for the UAE include:

• Reduced Oil Revenues—Dubai has very minimal dependence on oil for its economic growth, but Abu Dhabi and other Gulf nations are heavily reliant on oil to uplift their economic strength. When the oil prices would be lowered, Abu Dhabi and other Gulf nations would be impacted, leading to less investment in Dubai and the UAE.
• Lower Spending Power in the Gulf—Saudi Arabia and Qatar, being the neighboring countries of Dubai, contribute significantly to Dubai’s tourism and investment sector. When the oil prices would be lowered, Abu Dhabi and other Gulf nations being impacted from it would lead to their reduction in the capital for expansion and spending.
• Historical Precedent—In 2014-2015, a drop in oil prices led to a slowdown in property price growth and economic expansion in the UAE.

A Trump presidency would bring both opportunities and challenges for Dubai:

• Positive Effects: On the positive aspects, Trump presidency would result in the increased American immigration and investment, stronger UAE-Israel ties, and enhanced military cooperation.

• Negative Effects: If investors from outside the US have to pay more for property, that could slow things down. Also, if those wealthy Russians who moved here start heading back home if things cool down politically, that could mean less investment. Lower oil prices wouldn't be great for the economy overall, and if people's currencies weaken, they might not be spending as much on holidays here. So, there are definitely a few potential blows to keep an eye on.

While Trump’s policies may benefit some aspects of Dubai’s economy, they could also pose challenges for key industries. Around these challenges, the investors and businesses should closely monitor the expanding political landscape and its impact on the UAE’s economy in the years to come.