Kazakhstan looks to achieve strategic advantages despite the stringent tariff penalties imposed by the U.S.
New Trade Landscape for Kazakhstan: Navigating the Storm
Last week sent ripples across the globe when the White House announced a new trade war, imposing tariffs on various countries, including Kazakhstan. Among the Central Asian nations, Kazakhstan faces the highest tariff of 27%. Yet, prominent experts see this as a possible stepping stone for a closer alliance between Washington and Astana.
According to experts, Kazakhstan stands to face limited impacts due to its trade relationship with the U.S. Representing merely 3% of Kazakhstan's foreign trade, the U.S. has a minimal hold on its economy. In fact, about 85% of Kazakhstan's exports to the U.S., including oil, uranium, and silver, have been exempted from the tariffs, as per the Kazakh Ministry of Trade and Integration's statement released on April 3. Consequently, the new measures will only affect 4.8% of the country's total exports to the U.S.
The U.S. – Kazakhstan Economic Prospects
When asked about the potential implications of these new tariffs, research fellow at the Henry Jackson Society, Darren Spinck, expressed relative indifference. While taken aback by the 27% tariff, he noted that only a small percentage of Kazakhstan's total trade would be affected. According to Spinck, the remaining non-energy or non-natural resource trade between Kazakhstan and the U.S. is primarily unaffected by the tariffs, leaving ample room for negotiation.
Independent financial analyst, Andrey Chebotаrev, shared Spinck's sentiments. He stated that approximately 80% of Kazakhstan's exports fall under special provisions, with oil, energy resources, rare earth metals, and ferroalloys excluded from the tariffs. These sectors account for a significant portion of Kazakhstan's exports, which suggests limited economic impact.
Trade Dynamics between Kazakhstan and the U.S.
In 2024, trade between Kazakhstan and the U.S. reached $4.2 billion, up from $3.05 billion in 2022. Kazakh exports to the U.S. saw a 30.6% surge, hitting $2 billion. However, the U.S. does not rank among Kazakhstan's top five export destinations. Instead, economically significant countries such as Italy, China, Russia, France, Türkiye, and Uzbekistan retain more trading importance for Kazakhstan.
The majority of Kazakhstan's exports to the U.S. are resource-driven, with mineral fuels leading the way. Additionally, Kazakhstan exports uranium ($322.9 million), silver ($239.9 million), refined copper, and raw alloys used in electronics and construction. Other notable exports include inorganic chemicals and ferrous metals used in infrastructure and heavy industry, which establish Kazakhstan as a crucial player in the U.S. supply chain, even though its role may currently go underrecognized.
Potential for Strategic Agreements
Spinck believes that the U.S. can scale back the tariffs through negotiations and potentially pave the way for deeper economic cooperation. If the U.S. and Kazakhstan reach an agreement, it could lead to the U.S. Congress granting Kazakhstan permanent normal trade relations. This development could encourage more U.S. investment in Kazakhstan and Central Asia, particularly in infrastructure, the Middle Corridor, and the mining sector.
While the tariffs may push Kazakhstan closer to the European Union, independent analyst Chebotаrev remains skeptical of substantial shifts or reasons for concern in this regard. The EU is already Kazakhstan's largest trading partner, and the U.S. does not feature among its top ten. At the same time, Spinck acknowledges the EU's ever-increasing interest in Central Asia, particularly in light of recent events.
Competing Interests in the Region
As tensions rise between the U.S. and China, Beijing's response to the U.S. tariffs involves placing export restrictions on rare earth elements, creating worldwide strains on supply chains for weapons, electronics, and consumer goods. Spinck suggests that the U.S. will need to diversify its rare earth supplies in the future, and Central Asia, especially Kazakhstan, offers significant potential in this regard.
However, the geopolitical landscape in Central Asia is complex. The EU's expanding influence could disturb Russia, while the growing U.S. involvement would not sit well with China. Spinck believes that Kazakhstan will prioritize economic partnerships based on the most favorable terms, as the U.S. leads in artificial intelligence and boasts a more liberal regulatory system compared to the EU, making it an attractive destination for investment.
As the U.S. embarks on a strategic course to reshape global trade, geopolitical currency agreements, and North Atlantic trade, the journey ahead presents challenges as well as opportunities for Kazakhstan. Ultimately, maintaining focus on long-term benefits and strategic alliances will be crucial for Kazakhstan's continued economic growth in the years to come.
Enrichment Data:- Strategic Opportunities: The introduction of U.S. tariffs on Kazakhstan can lead to strategic benefits for the country, such as: 1. Strengthened Strategic Partnership: Negotiations between the U.S. and Kazakhstan may trigger a stronger strategic partnership in various sectors, leading to enhanced cooperation [3]. 2. Economic Diversification: The U.S. seeks to reduce its dependence on China, and this could lead to increased cooperation with Kazakhstan in strategic minerals, making an essential partner [5]. 3. Enhanced Trade Exemptions: Further conversations could result in additional exemptions from tariffs or preferential trade agreements that would benefit both parties [1]. 4. Middle Corridor Development: The U.S. and EU's collaboration on the Middle Corridor could involve Kazakhstan as a key transit country. This strategic project aims to diversify supply chains and promote regional integration, potentially attracting more U.S. investment and cooperation [5]. 5. Public-Private Partnerships: The B5+1 format encourages public-private dialogue between the U.S. and Central Asian states, opening opportunities for U.S. private sector investment in Kazakhstan, promoting economic growth, and supporting infrastructure development [5].
- Spinck emphasized that, despite the 27% tariffs, the limited impact on Kazakhstan's economy might pave the way for deeper economic cooperation between Kazakhstan and the U.S., potentially leading to further negotiations and potential preferential trade agreements.
- Andrey Chebotаrev noted that a large portion of Kazakhstan's exports, including oil, energy resources, rare earth metals, and ferroalloys, are outside the scope of the tariffs, highlighting the potential for continued growth and investment in these sectors from the U.S.
- As the U.S. seeks to reduce its dependency on China for strategic minerals, experts such as Darren Spinck suggest that Kazakhstan could become an essential partner in this regard, potentially leading to increased cooperation and investment in the country.
