UNCTAD has again warned of the damage trade wars could have on developing nations with weaker and smaller economies
The UN Trade and Development body (UNCTAD) has called for the most vulnerable countries to be protected from reciprocal tariffs as the global trade war ramps up.
UNCTAD said that developing nations were already grappling with low growth and mounting uncertainty, and pointed out that their activities had a ”negligible effect” on trade deficits.
As a result, these countries should be exempt from new tariff hikes, it said.
”Over the years, a rules-based global trading system has boosted international commerce and contributed to a gradual, steady decline in tariffs – a tax that countries levy on imported goods,” UNCTAD stated. “In 2023, about two thirds of world trade occurred without tariffs.
”In contrast, a sweeping spate of steeper tariffs recently introduced by major economies are raising concerns over escalating trade tensions and their impact on developing countries.”
US president Donald Trump’s tariffs, currently on pause for 90 days, were calculated at rates to balance bilateral merchandise trade deficits between the US and 57 of its trading partners, which range from 11 per cent for Cameroon to 50 per cent for Lesotho.
UNCTAD’s most recent report, ’Escalating tariffs: The impact on small and vulnerable economies’, found that in many cases, reciprocal tariffs risked devastating developing and least developed economies, without significantly reducing US trade deficits or increasing revenue collection.
The 57 trading partners concerned – 11 of them ’least developed countries’ – contributed minimally to US trade deficits, UNCTAD noted.
In fact, 28 out of those 57 trading partners each account edfor less than 0.1 per cent of the deficits, yet could still be subject to reciprocal tariffs.
As many of these economies were small in size, structurally weak with low purchasing power, it said, they offered limited export market opportunities for the US.
“Any trade concessions they grant would mean little to the United States, while potentially reducing their own revenue collection,” the UNCTAD report outlined.
If the reciprocal tariffs kicked in again, demand for many imported goods was likely to decrease because of higher prices, it said.
The trade body confirmed that even if US import levels were to remain at 2024 levels, additional tariff revenue collected from poorer and smaller economies would be minimal.
For each of 36 of the 57 trading partners, the reciprocal tariffs would generate less than 1 per cent of US current tariff revenues, it calculated.,
The report also pointed out that several countries faced potential reciprocal tariffs on export agricultural commodities the US doesn’t produce, for which there were few substitutes.
”Increasing tariffs on these goods, despite possibilities to add some revenues, is likely to result in higher prices for consumers,” UNCTAD said.
