US Tariffs Threaten Global Trade, Developing Nations Seek Alternatives

United Nations: The global trade landscape faces a potential 3 per cent contraction as the United States moves forward with sweeping tariff plans, signaling a significant realignment in global trade flows. According to Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), these developments could disrupt economic integration and shift export markets away from the US and China toward countries like India, Canada, and Brazil.

Speaking from Geneva, Coke-Hamilton warned that the newly imposed tariffs, even with the White House's temporary 90-day pause for most countries (excluding China), are already prompting exporters to adjust their strategies. Notably, China has retaliated with a massive 125 per cent tariff on US goods, exacerbating the standoff.

Export Patterns Begin to Shift

Countries heavily reliant on exports to the US are already adapting. Mexico, facing the brunt of the new tariffs, is seeing its trade reoriented away from the US, China, and Europe, with some gains in Canada, Brazil, and marginally in India. Likewise, Vietnam is shifting exports away from North America and China, instead tapping into the Middle East, North Africa (MENA), the EU, and South Korea.

Coke-Hamilton emphasized the impact on developing economies, especially in labor-intensive sectors like textiles. Bangladesh, the world’s second-largest apparel exporter, could face a 37 per cent reciprocal tariff, potentially slashing $3.3 billion in annual US-bound exports by 2029 if the measures take full effect.

Strategy for Developing Nations: Diversify, Add Value, Integrate

To withstand shocks like pandemics, climate events, or sudden policy changes, developing countries must prioritize diversification, value addition, and regional integration, said Coke-Hamilton. She urged nations not just to react to global uncertainties but to prepare proactively for future resilience.

Preliminary analysis conducted with French research institute CEPII, ahead of the 90-day pause and China's retaliatory hikes, estimates a potential 0.7 per cent drop in global GDP by 2040 due to the tariffs and related countermeasures. Countries such as Mexico, China, Thailand, and those in Southern Africa—alongside the US—are among the most affected.

China Chooses Strategy Over Escalation

Wendy Cutler of the Asia Society Policy Institute (ASPI) noted that China’s sharp 125 per cent tariffs make clear it's not backing down, despite US hopes that Beijing would fold under pressure. However, she also noted China's possible shift away from tariff-for-tariff retaliation, suggesting it is ready to deploy alternative economic tools.

With current tariff levels reaching 145 per cent on Chinese imports to the US and 125 per cent in reverse, trade between the world’s two largest economies has essentially stalled.

Daniel Russel, also of ASPI, described Chinese President Xi Jinping's approach as one of strategic patience. Rather than escalating, China appears to be positioning itself to endure and outmaneuver the US in the long run—expanding regional influence and keeping diplomatic pressure on America’s allies.

Xi’s recent tour of Southeast Asia is seen as part of a broader strategy to deepen economic ties in the region, capitalizing on the vacuum left as Washington’s tariff aggression alienates its partners.

(With PTI Inputs)

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