US-driven trade war forces Mubadala to change ‘assumptions’

• Wealth fund more cautious says CEO
• Each move considered on ‘merit basis’
• US will remain investment target

Abu Dhabi sovereign wealth fund Mubadala Investment Company said it will take more time to consider its investments and is changing its “base case assumptions” against the backdrop of heightened global trade tensions driven by the US.

The fund, which has more than $300 billion of assets under management in over 50 countries around the world – including a stake in US private equity company The Carlyle Group – will consider each transaction on a “merit basis”, CEO Khaldoon Khalifa Al Mubarak said on a conference on the sidelines of the IMF’s annual spring meetings in Washington DC.

“We are taking a bit more time in terms of how we look at these investments,” Al Mubarak said.

“Some of what we are seeing right now has an impact; [but] some doesn’t necessarily have an impact on a particular transaction with the horizon we are looking at.”

Notwithstanding its more protectionist policies through the imposition of the highest tariffs on imports in more than a century, the US will always remain a “major destination of capital coming from UAE institutions”, especially in technology, energy and infrastructure, Al Mubarak said.

“Obviously technology is a very important space … the US will continue to be a leader in that space,” he said.

A high-level delegation of UAE officials, led by Sheikh Tahnoon bin Zayed Al Nahyan, Abu Dhabi’s deputy ruler and UAE national security advisor, held meetings with counterparts in Washington last month and pledged $1.4 trillion of Emirati investment in the US over the next decade. 

President Trump is to visit the UAE, Saudi Arabia and Qatar from May 13 to 16, and is expected to discuss this and additional investment commitments from Gulf partners during his trip.

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“It looked like relatively blue skies, some clouds here and there, manageable overall,” Al Mubarak said of the period before April 2 when President Trump nearly tripled effective US tariff rates to around 25 percent. “Now, we have the situation obviously that we are seeing.”

Though Trump has paused the imposition of so-called reciprocal tariffs on countries around the world, effective US tariffs are estimated to be even higher now at around 27 percent given the 145 percent duty on goods from China. 

Without China, the effective rate of duties on all US imports – which takes into consideration different tariffs on different countries – is about 11 percent, up from 9 percent before April 2, and 2.5 percent before Trump came into office in January.

Al Mubarak said that the impact of the US policies “is happening very fast and, for investors like ourselves who are transacting on a regular basis, we have to look at each transaction on its own merit basis”.