According to a leading UN economist, US tariffs might cause global trade to decline by 3% and exports to move from markets like the US and China to Canada, Brazil, and India.
Last week, US President Donald Trump announced a hefty tariff package. Later, the White House declared that most nations would not be subject to reciprocal duties for 90 days, with the exception of China, which chose to slap 125% taxes on US imports.
“With major long-term changes in trade patterns and economic integration, global trade could shrink by 3%,” Pamela Coke-Hamilton, executive director of the International Trade Center, stated in Geneva on Friday.
For instance, she stated that Mexico’s heavily affected exports are moving from markets like the US, China, Europe, and even other Latin American nations to Canada and Brazil, with only slight increases, and to a lesser degree, India.
According to her, Vietnamese exports are also shifting away from the US, Mexico, and China and significantly rising toward markets in the Middle East and North Africa (MENA), the EU, Korea, and other regions.
Coke-Hamilton stated that textiles are a leading industry in terms of employment and economic activity for emerging nations, using clothing as an example.
In this regard, she stated that if a reciprocal tariff of 37% were to be implemented, Bangladesh, the second-largest producer of clothing worldwide, would lose USD 3.3 billion in yearly exports to the US by 2029.
She went on to say that focusing on three areas—diversification, value addition, and regional integration—is a crucial component of the strategy for helping poor nations deal with any global shocks, whether they be pandemics, natural disasters, or abrupt policy changes.
According to her, developing nations have the chance to actively plan for the future rather than merely navigating unpredictable times.
According to Coke-Hamilton, preliminary projections created in collaboration with the French
Economic research institute CEPII estimates that the impact of the so-called reciprocal tariffs and initial responses might lower global GDP by 0.7% by 2040, prior to the announcement of the 90-day moratorium and the extra tariff rises on China.
In addition to the United States, nations in Southern Africa, Mexico, China, and Thailand are also among the most impacted.
With China’s announcement of additional tariff hikes against US imports, it is evident that hopes that China would blink first in this trade war are misguided, according to Wendy Cutler, vice president and managing director of the Asia Society Policy Institute (ASPI) in Washington, DC, who commented on China’s decision to impose 125 percent tariffs on US imports.
China is in for the long haul. Beijing has also admitted that it has reached
the endpoint in retaliating with tariffs, possibly indicating that it has a variety of other weapons in its toolbox that might be used further if the US takes further action today, she said.
She also said that the high tariffs currently in effect—15% for Chinese imports to the US and 125% for US imports to China—virtually stop any trade in goods between the world’s two biggest economies.
It is unclear how long these tariffs will last, but eventually Beijing and Washington will realize they need to get back in touch and handle this worsening issue, she said.
“Chinese President Xi Jinping is not blowing things up, but he is also not backing down,” said Daniel Russell, ASPI’s vice president of international security and diplomacy.
According to Russell, he is placing a wager that the US market’s reaction will cause Trump’s tariff rant to implode.
In an indication that it is done playing Trump’s escalation game and is instead focusing on long-term strategic advantage, he continued, Beijing is moving away from symmetrical retaliation tariffs.
Beijing is attempting to outlive the trade war and outmaneuver Trump by announcing that it will disregard any further increases in US tariffs. Beijing wants to increase its diplomatic influence, protect its economy, and maintain pressure on US allies to hedge. While Washington lashes out and alienates its friends, Xi’s Southeast Asia journey is part of a strategy to strengthen China’s economic relations in the area, according to Russell.
