ITC: Tariffs could have ‘catastrophic impact’ on developing nations

The director of the United Nations’ trade agency warned on Friday that retaliatory tariffs and countermeasures could have a “catastrophic impact” on developing countries, potentially worse than cuts to foreign aid.

The International Trade Centre (ITC) projected that global trade could shrink by 3-7 per cent, and global GDP by 0.7 per cent, with developing countries bearing the brunt of the economic fallout.

“It is huge,” Pamela Coke-Hamilton, ITC executive director, told Reuters. “If this escalation between China and the US 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.”

Amid ongoing turmoil in global markets, President Trump this week announced a 90-day tariff pause on dozens of countries but raised duties on Chinese goods to an effective 145 per cent. In response, Beijing increased its tariffs on US imports to 125 per cent, further intensifying the trade war that threatens to disrupt global supply chains.

The ITC also noted that some of the world’s least developed countries, including Lesotho, Cambodia, Laos, Madagascar, and Myanmar, may seek to strengthen regional trade relations to absorb the loss of US market share for their exports.

For example, Bangladesh, the world’s second-largest apparel exporter, could lose $3.3 billion in annual exports to the US by 2029 if the US tariff of 37 per cent remains after the pause, according to ITC data. Coke-Hamilton suggested that Bangladesh may look to European markets as an alternative, as they still hold growth potential.

The ITC’s projections, based on data collected before Trump’s tariff pause and subsequent hikes on duties for Chinese imports, reflect the broader economic risks associated with escalating trade tensions.

Attribution: Reuters