The United Arab Emirates has sent Donald Trump a warning that it could move closer to China as the US president’s conflict with Iran shakes the foundations of its economic model.
The smoke signals started billowing last week. Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, the UAE’s president, went to China and returned with 24 trade and investment deals.
Since then, announcements and leaks have emerged about the UAE’s relations with the US and China, seemingly intended to push Mr Trump to pay more heed to Emirati interests.
“The UAE is trying to send out a few signals at the moment that they are prepared to look at their China relationship more closely, with the US seen as unreliable,” says Christopher Davidson, author of half a dozen books on the Gulf monarchies.
“It’s a strategic tightrope that the UAE keeps walking with China and the United States. And we’re in the latest chapter of that this week. They just need not to fall off that tightrope.”
The conflict’s closure of the Strait of Hormuz, the major trade artery linking major Emirati ports to the rest of the world, has punched a hole in the UAE’s exports, which were down 50pc in March by volume.
Since Mr Trump first launched attacks in late February, Iran has retaliated by firing thousands of missiles and drones into Dubai and Abu Dhabi.
This has damaged not only plants and ports, but also hindered the Emirates’ reputation for safety and stability.
Property and share prices have fallen, the number of flights to the country has halved and hotel occupancy rates are at barely a quarter of normal levels.
The International Monetary Fund last week slashed its forecast for the UAE’s 2026 economic growth from 5pc to 3.1pc.
The economic hit has prompted the UAE’s rulers to send signals of frustration to the US, while also leaning on China to offset the drop in trade.
“Economically speaking, the Emirates are realising, as all the other Gulf states are realising, that the future cannot be only with the United States,” says Andreas Krieg, a Middle East expert at King’s College London.
“And that the United States, even after Trump, is not a reliable partner. You have to diversify.”
A report in The Wall Street Journal on Monday said the UAE had sounded out the US about a financial backstop, known as a currency swap line, to help it deal with the fallout from the war.
The request underlined to US officials the painful cost of Mr Trump’s war to the Emirates. But it also contained an implied threat that the UAE might otherwise have to start settling its oil transactions using the Chinese yuan.
“They clearly think the threat of using the yuan is a way to get the attention of the United States,” Brad Setser, an economist and senior fellow for the Council on Foreign Relations, a US think tank, said on social media.
“The Emirates aren’t short [of] cash, but they are annoyed that the US is more or less assuming that the Emirates will use that cash to clean up the consequences of US decisions.”
Kevin Hassett, a top White House economic aide, told CNBC on Monday that he didn’t think a swap line would be required, but the US would support the UAE if needed.
“The UAE has been an incredibly valuable ally throughout this effort, and I’m sure the treasury secretary will make every effort to help them out, should that be necessary,” he said.
In a separate salvo from the UAE, Prof Abdulkhaleq Abdulla, a prominent Emirati academic with reported links to the ruling sheikhs, said on X that the UAE might need to reconsider hosting US military bases such as Al Dhafra in Abu Dhabi.
In a series of posts on Sunday, Prof Abdulla branded the bases “a burden and not a strategic asset”.
“No one is questioning the importance of UAE-US relations,” he said.
“If anything, this relationship is here to stay and will be deepened and expanding in days to come. However, time has come to review the value added [by] the US bases to our national defence portfolio.”
Mr Davidson said it was unusual for scholars in the UAE to proffer such strong views in a public forum.
“If he’s making a comment like that, it would to some extent have been approved right at the top, I think,” he said.
A few days earlier, Bloomberg reported that Abu Dhabi was weighing up a plan to restructure some of its sovereign wealth funds’ Chinese investments.
The rejig could ready the $358bn (£265bn) Mubadala fund and the $300bn L’Imad fund for a major new investment push into China.
Mubadala, Abu Dhabi’s second-largest wealth fund, has already invested more than $20bn in China, Bloomberg said, and plans to double its allocation there by 2030.
Its chief, Khaldoon Al Mubarak, is a key player in Abu Dhabi’s relationship with China, and accompanied the president on his visit to China last week.
“The visit to China last week was really about further diversification away from Western-centric investments,” Dr Krieg said.
China’s non-oil trade with the UAE topped $100bn for the first time last year. The Chinese have also invested heavily in Emirati infrastructure, helping the country build oil terminals and pipelines.
The US did just $35bn in two-way trade with the UAE last year, but the overall investment relationship tops $1tn. Mr Trump last year extracted a pledge from the UAE to invest another $1.4tn in the next 10 years, focused on technology.
The Emiratis will also need to restock with US weaponry, particularly their depleted missile defences.
But the UAE and the US scrapped a deal for the Emiratis to buy American F-35s in 2021, prompting speculation they might buy the rival Chinese J-35. The UAE and China conducted joint air force exercises in China in 2023 and 2024.
The UAE also joined the BRICS grouping in 2024, a talking shop led by Brazil, Russia, India and China that has drawn Mr Trump’s ire.
Mr Davidson said the UAE had to keep walking the tightrope between China and the US without antagonising either side.
“You have to constantly be identifying which side, as it were, best suits a particular need without having to go zero-sum,” he said.
“In terms of traditional security, the West is still the main supplier and protector. But I think the UAE does a nice job of demonstrating its sovereignty and autonomy in the ways that it can.”
Mr Krieg said the UAE had hoped to guarantee its security by cultivating cross-cutting ties with the US, China and also Russia.
But the US is now seemingly backing Israel’s ambitions over Gulf interests, while China and Russia were supporting Iran. So the UAE had arguably been let down on all sides.
“The UAE had the idea it was an indispensable partner for these global powers,” he said. “But that idea has not necessarily rung true.
“If you want to build a service-based economy in Dubai, you need stability. You need to make sure that whatever happened is not going to happen again. And neither of the great superpowers will be able to make that promise.”