The new tariffs, which are currently paused for 90 days, were designed to balance merchandise trade deficits between the US and 57 partner countries. Yet, according to UNCTAD, such a blanket approach could backfire.

The United Nations’ trade and development agency (UNCTAD) has urged the United States to avoid dragging the world’s most vulnerable economies into its escalating trade war with China, warning that steep new tariffs would do disproportionate harm to the Least Developed Countries (LDCs) and Small Island Developing States (SIDS) – while providing negligible economic benefit to the US.

UNCTAD Secretary-General Rebecca Grynspan issued the appeal following the release of a new report, “Escalating Tariffs: The Impact on Small and Vulnerable Economies,” on earlier this week. The report warns that reciprocal tariffs being considered by the US would damage dozens of developing countries that play a minimal role in America’s trade deficit.

“When the two main global economies impose tariffs, it affects everyone – not just the economies at the heart of the dispute,” Grynspan said. “Our emphasis has been to highlight what could happen to more vulnerable countries.”

The report found that 28 of the 57 countries potentially subject to reciprocal US tariffs each account for less than 0.1 per cent of the US trade deficit. Despite their marginal impact, many of these countries could face tariff rates as high as 50 per cent, such as Lesotho, while Cameroon could face 11 per cent.

“These countries really are making no contribution to the US trade deficit,” Grynspan emphasized. “Most of their exports to the US are raw commodities that are often essential to production processes, not in competition with US goods. Many of them are even exempt under current trade rules.”

Collateral Damage in a Superpower Dispute

The new tariffs, which are currently paused for 90 days, were designed to balance merchandise trade deficits between the US and 57 partner countries. Yet, according to UNCTAD, such a blanket approach could backfire. For most of these countries – many already struggling with debt, low growth, and fragile economies – higher tariffs could tip the scales into crisis.

“Higher tariffs would only exacerbate the existing debt problems of vulnerable nations,” Grynspan said. “They’re not a national security threat, they don’t contribute meaningfully to the deficit, and they offer little in terms of new revenue for the US.”

Indeed, for 36 of the targeted countries, projected revenues from reciprocal tariffs would amount to less than 1 per cent of the US’s existing tariff income. Conversely, the economic consequences for those countries could be severe: rising unemployment, disrupted markets, and capital flight from industries penalized by tariffs.

“These unequal tariff rates stimulate competition between weaker economies for better treatment,” Grynspan noted. “This uncertainty may trigger economic instability and further disadvantage already vulnerable nations.”

Protecting Vulnerable Partners, Stabilising Global Trade

The international trading system has historically been underpinned by a rules-based framework designed to encourage openness, stability, and predictability. This system, UNCTAD notes, has helped steadily reduce tariffs and fuel global trade. In 2023, two-thirds of international trade occurred without tariffs.

But the resurgence of protectionist policies by major economies threatens to unravel that progress.

“Tariffs from developing countries are often aimed at protecting foreign reserves and supporting domestic industry,” Grynspan explained. “But when rich economies impose sudden and steep tariffs, they disrupt the fragile balance that smaller nations depend on.”

The UNCTAD report also warns of the broader global consequences. Grynspan said the world has already entered a “new normal” characterized by slow growth and high debt. The threat of renewed tariff wars between superpowers could further dampen investment and trade.

“If we at least knew the final rules, we could adjust,” she said. “But right now, uncertainty is paralyzing investment. CEOs are holding back, waiting to see where things land. And this stagnation means global investment won’t return at the scale we need.”

Small Countries, Big Consequences

The fallout from increased tariffs wouldn’t just be felt abroad. Many of the goods the US imports from these countries  –  such as vanilla from Madagascar or cocoa from Ghana and Côte d’Ivoire  –  have few domestic substitutes. Hitting them with tariffs could raise prices for American consumers without significantly bolstering US revenues.

In 2024 alone, the US imported nearly $800 million worth of cocoa from Côte d’Ivoire, $200 million from Ghana, and $150 million in vanilla from Madagascar. These are essential imports with limited alternatives – and taxing them would hit both pocketbooks and production chains.

In response to these risks, Grynspan encouraged vulnerable nations to deepen their engagement in regional trade blocs, such as ASEAN in Southeast Asia, which can offer more equitable negotiating platforms.

“These partnerships could be very important, particularly at this precise moment,” she said. “Strengthening regional trade and diversifying markets are key strategies for economic resilience.”

She also called for greater South-South trade – commerce between developing nations – as a way to reduce dependency on volatile trade relations with richer economies.

UNCTAD’s appeal comes as trade relations between Washington and Beijing continue to sour, with tariff threats now pulling more countries into the geopolitical tug-of-war. Grynspan’s message to Washington was clear: vulnerable countries should not be collateral damage in a broader trade confrontation.

“Maybe we can avoid starting new bilateral agreements and negotiations that impose these costs,” she said. “Let’s spare them the pain of tariffs – not only because it’s the right thing to do, but because these actions won’t solve the problems the tariffs are supposedly addressing.”

As the pause on reciprocal tariffs ticks down, the world’s smallest economies may soon find themselves on the frontlines of a battle they neither started nor can afford to fight.