Trump’s “America First” policies are set to continue shaping global trade and economic landscapes. While his focus on domestic economic revival, reshoring industries, reducing US reliance on foreign markets, and trade protectionism may benefit the US market, the ripple effects on global markets may present both opportunities and challenges.
This is especially true amidst the trade war between the US and China but also extends to affect neighboring countries like Mexico and Canada, as well as its allies the European Union and the United Kingdom, and finally the Middle East.
For Egypt, a country strategically located at the crossroads of three continents, the shifting global dynamics compel us to question what Trump’s re-election means for Egypt.
This article explores two sectors of particular importance to Egypt, namely, energy and automotive manufacturing, which are likely to experience significant policy and economic shifts as a result of Trump’s second term in office.
Table of content:
Egypt’s Key Industries in a Transforming Global Economy
Opportunities for Egypt
Challenges for Egypt
Strategic Positioning for Growth
Egypt’s Key Industries in a Transforming Global Economy
With Donald Trump’s re-election, his “America First” policies are set to continue shaping global trade and economic landscapes. While his focus on domestic economic revival, reshoring industries, reducing US reliance on foreign markets, and trade protectionism may benefit the US market, the ripple effects on global markets may present both opportunities and challenges.
This is especially true amidst the trade war between the US and China but also extends to affect neighboring countries like Mexico and Canada, as well as its allies the European Union and the United Kingdom, and finally the Middle East.
For Egypt, a country strategically located at the crossroads of three continents, the shifting global dynamics compel us to question what Trump’s re-election means for Egypt.
This article explores two sectors of particular importance to Egypt, namely, energy and automotive manufacturing, which are likely to experience significant policy and economic shifts as a result of Trump’s second term in office.
Opportunities for Egypt
A) Strengthening Egypt’s Role in the Global Energy Market
As Trump pushes for increased US fossil fuel exports, particularly LNG, Europe will likely continue to seek alternative energy suppliers to reduce dependence on both Russian and American imports. This situation opens the door for Egypt to expand its LNG exports, particularly to European markets, where demand for natural gas will remain strong. Following the US election, oil prices rose due to concerns about Trump’s potential impact on global oil supply, particularly his policies towards Iran and Venezuela. Trump’s support for fossil fuels, past sanctions, and the possibility of renewed sanctions could reduce global oil supply, particularly from Iran. However, a stronger US dollar and rising US inventories offset some of these concerns.
For Egypt, these dynamics could affect oil prices, influencing import costs and investment in local oil and gas sectors, especially if global supply tensions rise. Egypt’s energy sector, including liquid natural gas (LNG) and renewable energy, stands to benefit from such shifting global energy demands. Additionally, there is hope in Egypt that Trump’s “strongman” approach will help bring stability to the region, reducing the impact of conflicts like the Gaza wars and Houthi attacks on Red Sea shipping, which have ultimately harmed Egypt’s economy.
Furthermore, Egypt’s growing focus on renewable energy, particularly solar, wind power, and green hydrogen, positions the country as a potential leader in green energy production. While Trump may scale back US investment in clean energy, the US was not a primary partner to Egypt on this front. It is Europe’s green energy targets and commitment to decarbonization which provides Egypt these opportunities to establish itself as a key partner for the EU in the renewable energy market, which includes the production of green hydrogen.
This is evident in Egypt’s strategic energy partnership with Greece, which is a result of the partnership between the Egyptian Natural Gas Holding Company (EGAS) and Copelouzos Group, signifying the growing regional collaboration in the energy sector. Egypt’s Town Gas has recently secured landmark contracts to supply natural gas to Romanian households and businesses.
B) Expanding the Automotive Sector
Trump has been vocal on the developing climate policies. Climate policies will not be a priority in Trump’s agenda. It is likely that Trump withdraw from the Paris Agreement, which was adopted at the UN Climate Change Conference (COP21). He might also withdraw from the UN Convention on Climate Change. As a result, there may be a delay the US’s transition to clean energy vehicles.
This could present an opportunity for Egypt to position itself as a manufacturing hub for EVs and EV components. While the automotive sector in Egypt is still heavily dependent on traditional vehicles, the global shift towards electric vehicles (EVs) and autonomous driving technology is undeniable. By fostering local innovation and attracting foreign investments in this growing market, Egypt could secure a competitive advantage in electric vehicle production. The automotive sector in Egypt, which has traditionally struggled with local production limitations and foreign dependency, stands to gain as global trade patterns shift.
Trump’s trade protectionism, particularly his tariffs on Chinese imports, are likely to disrupt global supply chains, creating space for Egypt to attract investment in automotive manufacturing. This enables Egypt to also benefit from a large web of free trade agreement, which Egypt is a party to. It also has a very strong manufacturing infrastructure and access to trade routes that is unmatched by any other country in the region.
Considering the other side of the coin, Egypt’s automotive market stands to equally benefit from potentially closer ties with the US under a Trump’s administration. An increased collaboration with the US and countries in the region, such as Gulf states, may result in more opportunities for local assembly plants, joint ventures, and supply chain agreements. The automotive sector could therefore become a vital export industry for Egypt, especially to regional markets in Africa and the Middle East, as demand for affordable vehicles continues to grow.
Challenges for Egypt
A) Energy Market Pressures
While Egypt is strategically positioned to benefit from the growing demand for LNG in Europe, the policies under Trump’s administration could present a number of competitive challenges. One of the most significant factors to consider is the US’s increasing push to expand its LNG exports, particularly to Europe, which has become a key energy partner throughout the war in Ukraine, and Russia’s reduced energy exports to the EU. The United States is ramping up its natural gas production, and as US LNG exports increase, Egypt may face stiffer competition in the lucrative European markets. As US LNG producers increase supply, the resulting pressure on global LNG prices could make it more challenging for Egypt to compete, particularly as Egypt’s LNG export capacity is still growing.
Additionally, Trump’s “America First” rhetoric and rising protectionist policies could further complicate Egypt’s access to cutting-edge energy technologies and investments from advanced economies. Higher tariffs and regulatory barriers could hinder Egypt’s ability to engage with key global partners. This would, in turn, make it more difficult for Egyptian energy companies to benefit from the latest innovations in energy extraction, storage, and transmission technologies
B) Trade Barriers and Supply Chain Challenges for Automotive Manufacturing
The jurisdiction of the Financial Regulatory Authority (FRA) for the examination of transactions in the non-banking The protectionist trade policies of Trump are designed to shield US industries. In his first term, it became evident how this approach can have far-reaching effects on global trade. Globalization was tested during the global COVID-19 pandemic and under the first Trump administration. The intricate trade and supply chain interdependencies and interconnectedness between countries has shown – for the first time – fragility and vulnerability.
Since the recent election, Trump has already voiced his thirst to implementing tariffs. The imposition of tariffs on raw materials such as steel, aluminum, and other critical components crucial to automotive production may lead to reduced demand for these materials in the US, potentially lowering their global prices. For Egyptian manufacturers, this could present an opportunity to source essential materials at a lower cost, improving their competitiveness as a low-cost producer in the global automotive market.
However, secondary effects of these policies, such as global supply chain disruptions, retaliatory tariffs, or increased shipping costs, could offset these benefits. As many components required for (electric) vehicle manufacturing are imported from low-cost manufacturing hubs like China, South Korea, and Taiwan, any broader trade tensions or shifts in global pricing structures will pressure global and local profit margins and affect the affordability of vehicles in both local and export markets.
The devaluation of the Egyptian Pound against the US Dollar has introduced significant volatility to the automotive market which persists to this day. The weakening of the Egyptian Pound has increased the cost of imported materials and components priced in US Dollars, leading to a rise in vehicle prices rather than a reduction. This has placed additional pressure on local carmakers, who are grappling with high production costs and shrinking profit margins.
Another significant challenge stems from Trump’s “reshoring” policies, which prioritize US manufacturing jobs versus imported manufactured goods. As US companies focus on revitalizing domestic manufacturing, they may scale back foreign direct investment (FDI) in regions like Egypt, making it harder for Egyptian automotive firms to attract top-tier projects and cutting-edge technology. Whether US-based automakers and suppliers will reduce or withdraw investments from foreign markets, including Egypt, as a result, is still to be seen. Trump’s policies of “reshoring” and “Buy American” could potentially lead to a reduction in the flow of US automotive investments into Egypt, just as the country seeks to attract more manufacturing operations as part of its broader industrial growth strategy.
To address these challenges, it is essential to strengthen Egypt’s automotive sector through localization efforts. Manufacturers can reduce their reliance on volatile foreign exchange markets and mitigate the impact of currency fluctuations by increasing the proportion of vehicles made with locally sourced materials and components. To maintain its competitiveness in an increasingly protectionist global market, it will be critical for Egypt to expand local production capabilities and deepening supply chains.
Strategic Positioning for Growth
As Trump’s second term reshapes global energy markets and manufacturing sectors amidst the already shifting dynamic international relations, Egypt’s energy and automotive industries face both promising opportunities and significant challenges. By expanding its energy infrastructure, and fostering partnerships regionally and internationally, Egypt can strengthen its competitive advantage in both sectors.
Egypt, with its strategic location linking Africa, Asia, and Europe, is well-positioned to become a vital player in meeting the world’s seismic economic shifts. The ongoing tensions and disruptions in global supply chains are causing a growing demand for more diversified and reliable suppliers, especially those in proximity to large trading hubs. Therefore, it is important for Egypt to rely on local production and manufacturing in areas of demand to feed in the shifting and growing demand globally. In the energy market, Egypt must continue to diversify its energy exports, focusing on LNG and renewable energy, while staying ahead of competition from US fossil fuel exports. In the automotive sector, Egypt must capitalize on shifting global supply chains and attract investment to reinforce its local production capabilities. Balancing these opportunities with the global uncertainties ahead will be key to maintaining steady economic growth and enhancing Egypt’s role in the regional and global market.
