Indian Firms Are Pivoting to the UAE as U.S. Tariffs Disrupt Exports
- Stephen James Mitchell
- Sep 24
- 8 min read
Updated: 2 days ago
In August 2025, U.S. President Donald Trump signed an executive order that effectively doubled tariffs on many Indian exports — raising duties on certain goods from 25 % to as high as 50%.
For Indian exporters whose largest overseas market is the U.S., this move is a seismic disruption. The stakes are high: reduced margins, loss of competitiveness, and even risk of losing market share.
At the same time, a strategic loophole is emerging: Indian firms are increasingly looking at the UAE as a gateway or re-export hub to bypass steep U.S. duties. According to an AGBI report, inquiries from Indian firms about UAE setups have surged by nearly 40% following the tariff hike. Already, Dubai’s Jebel Ali Free Zone (JAFZA) hosts more than 2,300 Indian companies.
The reasoning is relatively straightforward: goods processed, finished, or assembled in the UAE can often qualify as “UAE origin,” allowing Indian firms to benefit from lower U.S. tariffs, typically around 10%.
The Mechanics: How the UAE “Workaround” Operates
The key lies in rules of origin and local value addition. To reclassify goods as Emirati in origin, exporters must ensure that a certain proportion of the product’s value is added locally (by assembly, finishing, packaging, etc.). In practice, Indian firms aim to push 35–40% of value addition into their UAE operations. Once this threshold is met, shipments from the UAE to the U.S. can often enter under the lower U.S. duty rate—about 10%, rather than the punitive 50%.
To achieve this, Indian firms may bring in semi-finished or intermediate goods, complete assembly, finishing, quality control, packaging, and distribution in the UAE, and then export the final product from the UAE. This is especially attractive for goods whose final stages are less capital-intensive—textiles, jewelry, garments, and certain consumer goods are often cited as top candidates.
In effect, Indian firms are “re-routing” their exports: making the bulk of the value chain in India, shifting finishing or final transformation to the UAE, then exporting from the UAE to the U.S.
Why the UAE Is Attractive for Indian Firms as They Pivot in Response to U.S. Tariffs
Several advantages make the UAE an appealing choice:
Lower U.S. Tariff Exposure
As mentioned, goods classified as UAE-origin can face U.S. tariffs of around 10%, a vast improvement over the 50% burden on Indian-origin products.
Free Zones & Business-Friendly Regimes
The UAE has multiple free zones (like JAFZA) where foreign companies can enjoy benefits including 100% foreign ownership, duty-free import of raw materials, and streamlined operating rules.
Free zones often allow goods to be imported, processed, and re-exported without incurring local customs duties.
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Trade Agreements & Bilateral Ties
The UAE–India Comprehensive Economic Partnership Agreement (CEPA), effective since May 2022, has reduced tariffs and eased trade barriers between the two countries, enhancing the movement of goods and investments.
Indian goods entering UAE may benefit from lower import tariffs under CEPA, further lowering cost of upstream movement.
Strategic Logistics & Infrastructure
The UAE’s logistics and port infrastructure is world-class. Jebel Ali is one of the largest ports in the Middle East, and its free zone ecosystem is deeply integrated with sea, air, and rail connectivity—making it ideal for re-export operations.
Speed & Scalability
Given that many Indian firms already have contacts in the UAE—particularly in Dubai and Sharjah—and prior presence in free zones, scaling or pivoting operations is faster than setting up a new market from scratch.
Strategic Risks & Considerations
The strategy, while compelling, is not without challenges:
Stringent compliance on origin rules: U.S. Customs may demand evidence that the “substantial transformation” test has been met, or reject origin claims if local value-add thresholds are not clearly documented.
Initial investment and overheads: Setting up operations, acquiring land or facilities, hiring local staff, and integrating supply chains add cost and complexity.
Supply chain coordination: Components may still need to come from India or elsewhere, which introduces logistics cost, lead times, and risk of disruption.
Policy volatility: Trade policies in the U.S. can shift rapidly. A tariff reversal or stricter rules of origin could undo the advantage.
Competition for space: As more firms arrive, prime industrial / re-export land will see upward pressure on lease rates.
Still, for many exporters facing an existential threat from 50% duties, replicating even a portion of their operations in UAE may be the lesser evil—and a smart hedge.
Rising Demand for Commercial Real Estate in the UAE
The migration of Indian companies to the UAE in response to heightened U.S. tariffs is not only altering trade flows but also redefining the dynamics of UAE’s commercial real estate market.
As firms establish finishing and export bases in free zones, demand is surging for warehouses, industrial plots, manufacturing units, and logistics facilities.
Industrial and Logistics Real Estate Trends
Zones such as the Jebel Ali Free Zone (JAFZA), Dubai South, Sharjah’s Hamriyah Free Zone, and Abu Dhabi’s KIZAD are experiencing steady demand as Indian exporters establish a presence in the UAE.
Industrial and logistics properties play an important role in this process because businesses often require:
Warehousing to manage storage and shipment consolidation
Assembly or light manufacturing facilities to add local value where needed
Locations near ports and airports to streamline export flows
This growing interest reflects the broader trend of companies prioritizing logistics and industrial real estate to support re-export activities and maintain supply chain efficiency.
Over the past few years, demand in this segment has consistently been driven by both global trade shifts and the rise of regional distribution hubs, and Indian firms are now adding a fresh wave of momentum.
How Indian Firms Are Shaping Demand for Commercial Real Estate
Indian firms are accelerating their presence in the UAE in response to U.S. tariffs, and this is translating into broader demand for commercial real estate.
The initial wave of activity is concentrated in industrial and logistics hubs, where companies require warehousing, assembly facilities, and locations close to ports and airports. These functions are essential for meeting rules-of-origin requirements and re-exporting goods efficiently.
At the same time, many firms are also establishing offices in Dubai and Abu Dhabi to manage regional operations, oversee compliance, and coordinate trade. This is particularly relevant for exporters setting up permanent bases, since corporate offices are needed alongside physical production or assembly units.
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In consumer-facing sectors — such as jewelry, apparel, and food products — the move goes a step further. Companies are opening showrooms and retail outlets to build their brands in the Gulf and directly access a large expatriate and tourist market. For these businesses, having both a re-export hub and a retail footprint in the UAE strengthens their overall market positioning.
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Free Zones Scaling Capacity
Free zones play a pivotal role in accommodating this influx. Authorities in Dubai and Sharjah are reported to be considering fast-tracked approvals for Indian firms and offering customized real estate solutions.
Meanwhile, Abu Dhabi’s KIZAD (part of AD Ports Group) has been aggressively marketing its integrated industrial zones and logistics corridors, emphasizing scalable warehouse parks with lower lease costs than Dubai’s prime free zones.
Sectors Leading the Push
Not all sectors are equally incentivized to relocate.
Early movers include:
Textiles & Apparel: Light assembly, stitching, and labeling in UAE can meet local value-add requirements.
Jewelry & Gems: Indian jewelers, especially from Gujarat and Mumbai, already dominate Dubai’s Gold Souk; now they are adding finishing facilities to qualify exports as Emirati.
Food Processing: Indian spice, rice, and packaged food exporters are setting up repackaging units in JAFZA and Dubai Industrial City.
Engineering Goods: Machine parts and auto components are being finished or assembled locally to meet transformation criteria.
Each of these sectors requires specialized facilities, further fueling segmented demand across commercial real estate.
Capital Flow into the UAE’s Real Estate
The influx of Indian firms is reinforcing what is already a strong market for UAE commercial property. Industrial and logistics assets remain the primary beneficiaries, but demand for office and retail spaces is also expanding in parallel, particularly in Dubai’s business districts and major retail destinations.
For investors, this means the opportunity extends beyond warehouses: premium office towers, shopping centers, and mixed-use developments are also positioned to benefit from the structural shift in trade and business activity.
Long-Term Implications for the UAE
This trend is not merely tactical but could be structural. Even if U.S. tariff policies shift again, once Indian firms have invested in UAE operations, many will retain them as part of a diversified global supply chain.
The UAE then cements its role as a “bridge economy” — linking Asia’s production base to Western consumption markets.
Implications for Investors
For investors in UAE real estate, several clear themes are emerging:
Industrial and logistics assets are central – Demand for warehouses, assembly units, and logistics facilities is rising as Indian exporters establish re-export operations.
Commercial real estate is diversifying – Offices are needed for corporate management and compliance functions, while some sectors, such as jewelry and food, are also adding retail outlets.
Tenant demand spans multiple industries – From textiles and gems to packaged foods and engineering goods, a variety of sectors are driving space requirements.
Free zones remain pivotal – Ongoing expansion and development of free zone facilities continue to create opportunities for investors, developers, and institutional players.
Strategic Positioning for Indian Businesses
For Indian companies, building a base in the UAE is both defensive and strategic. On one hand, it helps mitigate the impact of steep U.S. tariffs by reclassifying exports through local processing. On the other, it provides a platform to access new markets across the Middle East and Africa, where demand for Indian goods is growing.
This aligns with the UAE’s long-term national priorities. The country has been working to diversify beyond oil and position itself as a global hub for logistics, trade, and investment. Indian firms, already among the UAE’s largest foreign business communities, are playing a significant role in this effort.
Conclusion
The U.S. tariff hike has accelerated Indian companies’ shift toward the UAE. By setting up operations in free zones, exporters are not only reducing tariff exposure but also integrating into one of the world’s most advanced trade ecosystems.
This movement is reshaping the real estate landscape. Industrial assets remain at the forefront, but the ripple effects extend into offices and, in select industries, retail. Developers are responding with more flexible and specialized facilities, while investors are finding new opportunities in both traditional and emerging segments of the market.
What began as a short-term response to tariffs is increasingly taking shape as a long-term reconfiguration of Indo-UAE trade ties. With Indian firms embedding themselves deeper into the UAE’s business landscape, demand for commercial real estate is likely to remain strong well beyond the current tariff cycle.
Speak With Me Directly – Let’s Discuss Dubai Commercial Real Estate
I’m Stephen James Mitchell, Managing Director of Global Investments and a licensed broker with The Luxury Real Estate Brokers LLC.
With over 25 years in global finance — and 18 years on the ground in Dubai — I’ve guided investors through the city’s most dynamic real estate opportunities, helping them build portfolios that balance growth with stability.
Whether you’re exploring Dubai commercial real estate for the first time or expanding your global holdings, I’ll provide transparent, data-backed advice — free from sales pressure.
📞 Let’s schedule a conversation. No obligations, just clear insight into one of the world’s most exciting markets.
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