ASTANA - Here's the lowdown on the shocker that bubbled up in the White House Rose Garden last week: US President Donald Trump rolled out a trade war declaration, slapping mirror tariffs on nearly every nation - even trickling down to Kazakhstan.
Kazakhstan Pursues Strategic Advantages Amidst Tough US Import Duties
Gearing up for a 27% tariff – the steepest tariff in Central Asia – Kazakhstan is expected to take it in stride, according to experts. Some even see a silver lining in this storm, as it might catalyze closer partnerships between Astana and Washington.
With the US accounting for only a mere 3% of Kazakhstan's foreign trade, the country may not bear the brunt of this trade war as some might think. The list of exemptions outlined in the U.S. President's Executive Order, as revealed by Kazakhstan's Ministry of Trade and Integration, axes 4.8% of the nation's total exports to the US.
Experts: Kazakhstan might just skate by
As we picked the brains of Kazakh and American experts on this, Darren Spinck, a research fellow at the Henry Jackson Society, minimized the impact of these elevated tariffs on Kazakhstan. Astonished by the 27% tariff, he noted that only a tad percentage of Kazakhstan's total trade will be impacted.
"There's a silver lining here. From what I gather, only approximately 5% of non-energy or non-natural resource trade between Kazakhstan and the US is subject to that 27% tariff. So scope lies for negotiations," he exclaimed.
Spinck also foresaw the potential for dialogue between the two presidents, Kassym-Jomart Tokayev and Donald Trump, to culminate in a broader agreement that's mutually beneficial.
"The bulk of Kazakhstan's exports to the US – natural resources and energy – remain unaffected," he added.
Independent financial analyst, Andrey Chebotаrev, echoed Spinck's viewpoint. "These new tariffs aren't going to make much of a difference for us. A whopping 80% of our exports fall under special provisions. When you scrutinize the fine print of Trump's tariff order, oil, energy resources, rare earth metals, and ferroalloys are exempt. These make up the bedrock of our exports," he said.
According to Kazakhstan's Bureau of National Statistics, trade with the US reached $4.2 billion in 2024, surging from $3.05 billion in 2022. Kazakhstan's exports to the US surged 30.6% to hit $2 billion. Despite the US figures, it remains outside Kazakhstan's top 5 export destinations, which include Italy, China, Russia, France, Turkey, and Uzbekistan.
Kazakhstan's exports to the US are primarily resource-oriented, with mineral fuels leading the charge. The country also exports uranium ($322.9 million), silver ($239.9 million), refined copper, and raw alloys used in electronics and construction. Inorganic chemicals and ferrous metals used in infrastructure and heavy industry also take a notable share. This export blend cements Kazakhstan as a crucial, yet underappreciated, player in the US supply chain.
Room for strategic deals
Spinck reckoned there's potential for the US to scale back the tariffs through negotiations and perhaps pave the way for deeper economic cooperation.
"This presents an opportunity. If the US and Kazakhstan reach an agreement, it could even create a platform for the US Congress to grant Kazakhstan permanent normal trade relations. That would likely draw in more US investment into Kazakhstan and Central Asia – particularly in infrastructure, the Middle Corridor, and the mining sector," he explained.
However, when asked whether these tariffs would shove Kazakhstan closer to the EU, Chebotаrev remained unconvinced. "The EU is already our largest trading partner, and the US doesn't rank among our top ten," he said. "I don't predict any sizable shifts or grounds for concern."
Spinck agreed, also pointing to last week's EU-Central Asia Summit in Samarkand. "Europe is looking to invest in the region, particularly in rare earth elements," he said.
While tensions are ramping up between the US and China, Beijing responded by placing export restrictions on rare earth elements – a move that could squeeze global supply chains for weapons, electronics, and consumer goods. Spinck observed that, given these circumstances, the US will inevitably need to diversify its rare earth supply in the future, and Central Asia, especially Kazakhstan, presents an irresistible allure.
"I've talked about this frequently – Central Asia promises great things for the US. I do see some intriguing dynamics at play here, though, with four parties all vying for the region's attention: Brussels, Washington, Beijing, and Moscow," he commented, outlining the geopolitical competition going down in the region.
According to Spinck, Russia won't welcome the EU's expanding influence in Central Asia, especially considering Russia's stance on Ukraine. Similarly, China won't be enthused with increased US involvement. In Spinck's view, Kazakhstan will choose partnerships based on the most favorable economic terms. He highlighted that the US leads in artificial intelligence and boasts a less constrictive regulatory system compared to the EU, making it a captivating option for investment.
Regarding the reasons behind Trump's tenacious stance in the tariff war, Spinck offered an insightful perspective, suggesting that many economists overlook it as a long-term strategy by the Trump administration. According to Spinck, it is part of a grander initiative to reshape global trade, currency agreements, and North Atlantic trade. Although acknowledging the magnitude of this undertaking, he underlined that it is both feasible and essential. And, the dropping bond yields symbolize this long game strategy.
"Bond yields are headed south, implying escalating demand for US Treasuries. This leads to a lower US debt burden, enabling the Fed to cut interest rates. That lowers personal debt for American citizens and supports homeownership," he said.
Eurasian Development Bank holds court
The Eurasian Development Bank (EDB) publicly declared that the broader effects of rising protectionism on its member states should not be overlooked. Kazakhstan faces a 27% tariff but, as previously mentioned, the US accounts for merely 3% of its trade, with the majority of its vital exports remaining exempt. The remaining nations, Armenia, Kyrgyzstan, and Tajikistan, will feel the pinch with a 10% tariff, but the US represents only 1%, 3.9%, and 0.1% of their trade respectively. Russia and Belarus, on the other hand, will see no alterations as trade with the US remains markedly lower than pre-sanctions and pre-pandemic levels.
However, the EDB cautioned against the indirect risks. A worldwide economic downturn could grind demand for raw materials, adversely affecting energy-exporting nations. Unstable oil prices may arise from increasing uncertainty and sluggish global business activity. Additionally, investment inflows into emerging markets may dwindle due to increased risk perception.
While the direct trade impact of the new US tariffs on Kazakhstan and its neighbours may be minimal, the broader geopolitical and economic consequences are beginning to take shape.
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Getting Ahead of the Game: Potential Agreements
- Critical Minerals and Rare Earth Elements: A series of agreements, such as the U.S.-Kazakhstan Critical Minerals Agreement signed in 2022 and the C5+1 Critical Minerals Dialogue, encourage U.S. investment in Kazakhstan's mineral resources. These partnerships promote technology transfer and modern mining techniques, enabling both nations to gain secure, non-Chinese sources of critical minerals and develop clean tech supply chains[5].
- Hydrogen and Energy Cooperation: Strategic collaboration in hydrogen production and distribution could stimulate significant investment, fostering economic growth and reducing dependence on traditional fossil fuels – a trend that aligns with the global move towards renewable energy[3].
- Trade Diversification and Exemptions: Although tariffs have been imposed, Kazakhstan's exports, including oil, uranium, and silver, remain largely untouched. This suggests potential for broader trade agreements that could expand these exemptions or forge new trade routes[1].
- Multilateral Diplomacy and Regional Cooperation: Kazakhstan's multivector foreign policy creates opportunities for the nation to collaborate with not only the US, but also the EU, Russia, and China. This could culminate in strategic diplomatic initiatives involving the US, ensuring regional stability and cooperation in the process[3].
These proposed agreements could yield substantial economic and strategic benefits for both nations, even as they navigate through ongoing trade tensions.
- The 27% tariff on Kazakhstan's trade with the US, while significant, may not significantly impact the country due to the bulk of its exports being exempt, according to Darren Spinck, a research fellow at the Henry Jackson Society.
- Experts suggest that the high tariffs could lead to negotiations between Kazakhstan and the US, potentially culminating in a mutually beneficial broader agreement, as mentioned by Darren Spinck.
- The tariffs might provide an opportunity for deeper economic cooperation between Kazakhstan and the US, with the potential for the US Congress to grant Kazakhstan permanent normal trade relations, as Spinck explained.
- Andrey Chebotаrev, an independent financial analyst, foresees the tariffs being unlikely to push Kazakhstan closer to the EU, thanks to the country's already close trading relationship with the EU.
