A surge in steep tariffs imposed by major economies risks harming the world’s poorest nations while doing little to reduce trade imbalances, according to a new United Nations report.
For decades, a rules-based global trading system has helped lower tariffs — taxes on imported goods — facilitating international commerce. By 2023, nearly two-thirds of world trade occurred tariff-free. However, recent protectionist measures have sparked fears of escalating trade tensions, with developing economies bearing the brunt.
In its latest report titled Escalating Tariffs: The Impact on Small and Vulnerable Economies, UN Trade and Development (UNCTAD) urges exemptions for the most vulnerable nations from 'reciprocal tariffs' —measures designed to offset trade deficits between the US and 57 trading partners. These tariffs, currently suspended for 90 days, range from 11 per cent for Cameroon to 50 per cent for Lesotho.
The report warns that reciprocal tariffs could cripple developing and least-developed economies without meaningfully reducing US trade deficits or boosting government revenues. Of the 57 affected nations — 11 of which are least-developed countries — many contribute less than 0.1 per cent to the US trade deficit.
“These economies are small, structurally weak, and have limited purchasing power, offering minimal export opportunities for the US,” the report states. “Any trade concessions they make would have negligible benefits for the US but could slash their own revenue streams,” it added.
If reinstated, reciprocal tariffs could dampen demand for imports in US due to higher prices. Even if import levels remain steady, the additional revenue from poorer nations would be marginal. For 36 of the 57 affected countries, the tariffs would contribute less than one per cent to current US tariff earnings.
The report highlights another unintended consequence: potential price hikes on essential goods. Some targeted nations export agricultural products — such as vanilla from Madagascar and cocoa from Côte d’Ivoire and Ghana — that lack substitutes in the US.
In 2024, the US imported $150 million worth of vanilla from Madagascar and nearly 150 million worth of vanilla from Madagascar and nearly $1 billion in cocoa from Côte d’Ivoire and Ghana combined.
Tariffs on these goods could inflate consumer prices despite generating minor revenue gains.