At an Oval Office press conference earlier this month, President Donald Trump said he decided to pause his latest round of so-called “reciprocal” tariffs by 90 days because “we don’t want to hurt countries that don’t need to be hurt.” But that might be easier said than done. As the second coming of “Liberation Day” continues to lurch closer with no give or take in sight, the outlook for the developing world grows even more desperate as it braces itself for sweeping changes that could rewrite the rules of trade or even upend entire economies.
It’s why the United Nations Trade and Development Program, or UNCTAD, warned this week that the White House needs to exempt the world’s most vulnerable countries from what appear to be unnecessarily punitive taxes. Even at the lowest 10 percent level, the additional duties on small and least-developed countries would only disproportionately harm their ability to export to the U.S. market without significantly closing their trade gap or boosting tariff revenues, the agency said.
Indeed, of the 57 named countries that Trump claims employ high tariffs and other unfair economic practices to put American exporters at a disadvantage, 36—which means most of them—will each generate less than 1 percent of U.S. tariff revenues if the original rates go through. For 28 of them, or nearly half of the list, their individual portion would amount to less than 0.1 percent of the total U.S. trade deficit.
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To lay out some numbers that were thrown around before the respite on the original tariff rates—barring, that is, China—a 45 percent levy on Myanmar would contribute only 0.047 percent to the U.S. trade deficit, while a 50 percent duty on Lesotho would add an even lower 0.019 percent. Even the most-tariffed of them—Laos, at 48 percent—would bring in only 0.063 percent.
“Some [of these] trading partners are very small and/or economically poor with very low purchasing power,” UNCTAD wrote in a global trade update. “As a result, they offer limited or no export market opportunities for the United States. Trade concessions from these partners would mean little to the United States, while potentially reducing their own revenue collection.”
That goes even for countries that export mineral products, such as Zambia and the Democratic Republic of Congo, which the agency said would generate negligible bonus revenue for the United States while further stymying their ability to diversify and add value to their exports. Major oil exporters, such as Guyana and Nigeria, would likewise yield very little, since oil has been carved out from any additional tariffs.
Then there’s the fact that several trading partners export agricultural commodities that are not produced in the United States and for which there are few substitutes, such as vanilla from Madagascar and cocoa from Côte d’Ivoire. Considering Americans imported $150 million of the former and close to $800 million of the latter, increasing tariffs on such goods, while generating some revenue, can only result in higher prices for consumers, UNCTAD said.
Those countries aside, the world economy is on a recessionary trajectory, the agency said as it predicted a potential 2.3 percent slowdown this year. In a separate trade and development foresights report, also published this week, UNCTAD said that “subdued demand, trade policy shocks, financial turbulence and systemic uncertainty” are ramping up pressures to an almost unprecedented level, particularly for poorer nations.
Any late-2024 and early-2025 bump in global trade, it pointed out, was driven in part by front-loaded orders. This momentum is not only expected to stall but could even reverse as new tariffs come into effect during the rest of the year, further roiling the trade policy uncertainty that is running interference with long-term business decisions.
The data bears this out. It was only earlier in the year that the Economic Policy Uncertainty Index, which tracks mentions of the term “policy uncertainty” in the news, soared to its highest levels this century. Between early January and late March, the Comprehensive Shanghai Export Containerized Freight Index—a critical barometer of international shipping and trade activity—collapsed by 40 percent to levels last seen before the pandemic, when global merchandise trade was already showing signs of stagnation.
“Trade policy uncertainty, now at historic highs, is weighing heavily on business confidence and long-term planning and reshaping global trade patterns,” UNCTAD said. “Manufacturers and investors are delaying decisions, reassessing supply chain strategies and stepping up risk management efforts.”
Yet it’s the world’s suppliers, many say, that will end up bearing the brunt.
‘Definitely going to kill sustainability‘
For one denim manufacturer in a global South nation that will be hard hit if proposed rates go through, the idea that tariffs will bring manufacturing jobs back to the United States would be an admirable goal if it had been better realized.
“Reshoring sounds appealing in theory. But in practice, denim manufacturing relies on complex, interdependent systems—skilled labor, water and energy infrastructure, mature input supply chains, and decades of know-how,” this person said, requesting anonymity because of fears of reprisal. “Most U.S. facilities are not currently positioned to take on this scale of production competitively or sustainably. What tariffs often achieve is not a return to domestic manufacturing, but a reshuffling of orders to other low-cost countries, sometimes with weaker labor and environmental oversight.”
For suppliers that have invested in fair wages, environmental compliance, and low-carbon manufacturing, tariffs create a “double bind,” the manufacturer added. “Brands push for transparency, traceability and emissions reduction—yet when tariffs raise costs, the financial burden is passed down to us. There is no room left to reinvest in sustainability or improve worker well-being when we’re forced to absorb trade shocks with no warning or support. If the goal is fairer trade, there is a better path: incentivize shared responsibility, invest in ethical sourcing and reward suppliers who are leading on climate action and human rights.”
Already, many apparel manufacturers, especially those that revolve around creating products for export to the United States, are seeing spooked buyers that are, if not outrightly freezing existing orders, then at least holding back on placing new ones until they can gain more clarity about final tariff figures. But even this augurs further financial pain for production to come.
“We’re expecting to have to share the cost of tariffs one way or another,” said a supplier from Pakistan, who also spoke on the condition of anonymity and is anticipating as much as a 29 percent tariff rate should a bilateral deal prove unsuccessful. “I think that will be part of the negotiations that will be happening as retailers figure out what their final costs will be. They still do not know that at the moment. But we expect a lot of squeeze coming in. And most of that cost is going to come out from the human resources.”
And if 29 percent tariffs go through, then manufacturing in Pakistan will become a numbers game as it competes with countries that have higher duties (Cambodia faces a 49 percent tax) or lower ones (Turkey could wind up on top with its more attractive 10 percent rate).
“A lot of work has stopped in terms of CSR and sustainability, because no one is sure about priorities at the moment and these are all capex-heavy investments,” the supplier said. “Tariffs might not kill fast fashion, but it’s definitely going to kill sustainability. People in the global South are already having difficulties finding financing for climate projects. Now it’s going to be impossible, because a lot of investors are not going to make them a priority. There is no push from the government, even from the European side, with the omnibus package coming in and everything getting pushed back.”
Muhammad Azizul Islam, professor in sustainability accounting and transparency at the University of Aberdeen Business School, already knows what price-cutting will look like. A survey of 1,000 suppliers he conducted in Bangladesh found 76 percent of respondents were selling finished garments at the same price in December 2021 as they did in March 2020, despite skyrocketing material and energy costs. Some 8 percent were even producing clothes for less than they cost to make, even for prominent retailers such as C&A, H&M and Zara owner Inditex. The tariffs’ impact on Bangladesh, which could face a 37 percent or 53 percent tax bill, could be more catastrophic than Covid-19.
“For every $1 a Bangladeshi clothing factory makes, someone in America makes $9, $14 or $19. Who is extracting the most surplus value? Before imposing tariffs, why not acknowledge the massive global exploitation already underlying America’s so-called ‘greatness’?” Islam said. “Tariffs will only squeeze prices further, leading to even greater exploitation of workers. Since you can’t make a T-shirt for $1, you somehow still need to keep trading with Bangladesh. So the ultimate victims of your game are the workers.”
UNCTAD said that the White House should not ignore the fact that many low-income countries face a “perfect storm” of worsening external conditions, chief among them heavy debt burdens and diminishing domestic growth. More than half of low-income countries—35 out of 68—are currently in or face a high risk of debt distress characterized by a fevered build-up of debt, exorbitant borrowing costs and diverted government spending from critical needs to debt servicing. Meanwhile, capital is increasingly being funneled toward “safer” or more “stable” assets and markets in the more advanced parts of the world.
But the agency also expects to see a “sharp deceleration” of the U.S. economy to 1 percent gross domestic product growth in 2025, largely due to the cloud of increased policy uncertainty, creating an economic environment that will disrupt private consumption and investment alike. Growth in the euro will “remain subdued” at 0.8 percent, and the United Kingdom will show a “marginal decline” in growth to 1 percent. In East Asia, UNCTAD expects regional growth to decline to 3.4 percent this year, with China in particular clocking in a likely 4.4 percent. In South Asia, it added, food price volatility and complex debt dynamics will continue to create headwinds for economies such as Bangladesh, Pakistan and Sri Lanka. South Africa, Egypt and Algeria, which make up nearly half of Africa’s combined economic output, similarly present a “mixed picture of recovery and challenges.”
Any tariff escalation that happens when processed or finished goods are taxed more than the raw materials used to make them, as is frequently the case with apparel production, tanning and other forms of light manufacturing, could further hobble the competitiveness of many low-income countries, posing what UNCTAD describes as a “structural barrier” to economic development that hurts the vulnerable and poor.
“Overall, current trends indicate a subdued outlook for the manufacturing sector, while instability over tariffs likely adds to risks of a slowdown,” the agency added. “Escalating trade tensions threaten development progress, particularly for the most vulnerable economies, with real negative effects on businesses already unfolding.”