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Gulf utility projects unbothered by Trump tariffs so far

21 April 2025

Commentary
Jennifer Aguinaldo
Energy & technology editor

The sweeping tariffs that US President Donald Trump imposed on trading partners with surplus exports to the US on 2 April, which he paused, barring tariffs on China, a week later, would have had little impact on the region’s utility projects, particularly on engineering, procurement and construction (EPC) contractors.

For one, most materials and equipment used, especially in power plant projects, do not originate from the US.

Original equipment used in power generation projects, which comprises a major cost, is imported mainly from China for renewable power plants and from Europe for thermal power plants, except for a few GE Vernova turbine models.

Other components, such as instrumentation and control equipment, that are usually sourced from the likes of the US’ Emerson, can be sourced from other suppliers too.

The main concern, however, is the extent to which the changing tariffs landscape under Trump will trigger market uncertainty and affect oil prices. This, in turn, could impact regional government revenues and capital spending, particularly in Kuwait and Saudi Arabia.

Tariffs staying high between the US and China risk sending Brent prices down to around $40 to $50 a barrel, a range that could result in projects being pulled back due to an economic slowdown worldwide, notes a region-based utility consultant, Robert Bryniak.

It does not necessarily mean that independent water or power projects will be halted, as they do not rely on current capital expenditures, since the private sector incurs these costs.

Bryniak says these projects might only be cut back “if future demand is expected to be lower due to an economic slowdown”.

Unabated

An estimated $193bn-worth of power and water production and distribution network contracts are under construction across the six GCC states, according to MEED Projects data.

A further $77bn-worth of such contracts are under main contract bid or evaluation, while almost $117bn are in the early study and front-end engineering stages.

Current and planned spending is underpinned by the need to lower greenhouse gas emissions, diversify the electricity production mix and support long-term net-zero emission targets, in addition to supporting economic expansion programmes.

For Abu Dhabi and Riyadh, in particular, plans to become global artificial intelligence hubs will further drive expected electricity demand growth over the short to medium term.

The procurement and tender proceedings for many projects have continued unabated, if not accelerated, in the intervening weeks since Trump announced the tariffs.

This implies that tangible demand growth and a vision driven from the top down outweigh what appears to be whimsical tariff policy changes in the US.

It could also imply that the region’s strong alliance with the White House continues to provide helpful buffers that are so far helping to inoculate their economies from temporary, if perceived, downturns.

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Jennifer Aguinaldo

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