(In United State) Impact of Tariffs on Developing Countries Could Be 'Catastrophic,' Says UN Trade Agency

The ongoing trade tensions sparked by sweeping tariffs imposed by U.S. President Donald Trump—and subsequent retaliatory measures—could have a "catastrophic" impact on developing countries, according to Pamela Coke-Hamilton, executive director of the International Trade Centre (ITC). 

In comments made on Friday, she highlighted how these tariffs could pose significant risks that may surpass the adverse effects of cuts to foreign aid.

Projected Economic Consequences

The ITC has projected that global trade could shrink by approximately 3% to 7%, leading to a potential decline in global gross domestic product (GDP) by around 0.7%. Developing countries are expected to bear the brunt of these impacts, which could exacerbate existing economic vulnerabilities.

Coke-Hamilton expressed concern about the escalating trade conflict between the U.S. and China, stating, "If this escalation continues, it will result in an 80% reduction in trade between the countries, and the ripple effect of that across the board can be catastrophic." Such a reduction would not only harm large economies but would also have far-reaching consequences for smaller nations that rely on trade for growth and development.

Current Global Market Turmoil

The news of Trump’s recent announcement—an unorthodox 90-day tariff pause on dozens of countries, alongside an increase in tariffs on Chinese imports, effectively raising total tariffs to 145% when considering earlier levies—has contributed to ongoing volatility in global markets. As markets reeled from these changes, fears intensified that China might retaliate with higher tariffs on U.S. goods, potentially raising the current 84% tariff rate even further.

Coke-Hamilton pointed out that many developing economies, which have made progress in recent years, could find themselves regressing due to these new obstacles. "Tariffs could have a much more harmful impact than the removal of foreign aid," she stated, underscoring the importance of stable trade relations for fostering development.

The Data Behind the Projections

The ITC’s alarming projections are based on data collected before the announcement of the 90-day tariff pause and the subsequent escalation of tariffs on both sides. The estimates do not account for the potential ramifications of ongoing negotiations or any future trade agreements.

As the situation continues to develop, there remains uncertainty regarding how developing countries will navigate these turbulent waters. Economies that rely heavily on exports face a precarious path ahead, as reduced demand from major markets could lead to lower growth rates, increased unemployment, and social unrest.

Final thought 

The potential "catastrophic" consequences of U.S. tariff politics, particularly for developing countries, highlight the interconnected nature of today’s global economy. Policymakers must weigh the longer-term implications of trade tariffs against short-term political gains, recognizing the significant harm that may be inflicted on vulnerable economies.

As trade tensions persist and the global economic landscape shifts, it is crucial to foster dialogue and cooperation among nations to mitigate risks and promote economic stability. Failure to address these issues may not only hinder economic progress in developing countries but could also lead to broader global instability. The urgency of finding diplomatic resolutions to these trade conflicts cannot be overstated, as collaborative approaches may hold the key to sustainable growth for nations around the world.