UNCTAD Advocates For Exemption Of Vulnerable Economies From Reciprocal Tariffs Amid Trade Tensions

The United Nations Conference on Trade and Development (UNCTAD) has intensified its advocacy for exempting the most impoverished and vulnerable nations from "reciprocal tariffs." According to a recent report, these smaller economies, which are already struggling with slow growth and increasing uncertainty, should not face new tariff increases as their impact on trade deficits is minimal.

UNCTAD highlighted that a rules-based global trading system has historically facilitated international trade and led to a steady reduction in tariffs. By 2023, approximately two-thirds of global trade was conducted without tariffs. However, recent tariff hikes by major economies have raised concerns about escalating trade tensions and their effects on developing countries.

The report titled "Escalating tariffs: The impact on small and vulnerable economies" reveals that reciprocal tariffs could severely harm developing and least developed countries without significantly addressing US trade deficits or boosting revenue. These tariffs, currently paused for 90 days, were set at rates intended to balance bilateral merchandise trade deficits between the United States and 57 trading partners.

Among these 57 partners, 11 are least developed countries. Despite contributing minimally to US trade deficits, they could still face reciprocal tariffs. UNCTAD notes that 28 of these partners each account for less than 0.1 percent of the deficits yet remain at risk of being affected by such measures.

UNCTAD's findings indicate that the introduction of higher tariffs by major economies is causing alarm over potential increases in trade tensions. The organisation warns that these actions could have detrimental impacts on developing nations, which are already facing significant economic challenges.

The report underscores that while reciprocal tariffs aim to address trade imbalances, they may not effectively reduce US trade deficits or enhance revenue collection. Instead, they pose a threat to the economic stability of smaller economies with limited influence on global trade dynamics.

In conclusion, UNCTAD's call for exempting the poorest nations from reciprocal tariffs highlights the need for a more equitable approach to international trade policies. By recognising the minimal impact these economies have on trade deficits, policymakers can help protect vulnerable nations from further economic strain.

With inputs from WAM