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Info Service on WTO and Trade Issues (Apr25/14) Penang, 15 Apr (Kanaga Raja) — UN Trade and Development (UNCTAD) has called on the poorest and most vulnerable economies to be exempted from the “reciprocal tariffs” announced by the Trump administration, arguing that in many cases, the tariffs risk devastating these economies, without significantly reducing the United States’ trade deficit or contributing to its additional tariff revenue collection. According to UNCTAD, already grappling with low growth and mounting uncertainty, vulnerable and small economies, whose activities have a negligible effect on trade deficits, should be exempt from new tariff hikes. In releasing its latest Global Trade Update on 14 April, UNCTAD said the reciprocal tariffs, currently on pause for 90 days, were calculated at rates to balance bilateral merchandise trade deficits between the United States and 57 of its trading partners, which range from 11% for Cameroon to 50% for Lesotho. However, UNCTAD pointed out that the 57 trading partners concerned – 11 of them Least Developed Countries – contribute minimally to US trade deficits. It noted that 28 out of these 57 trading partners each account for less than 0.1% of the deficits, yet could still be subject to the reciprocal tariffs. As many of these economies are small in size, structurally weak with low purchasing power, they offer limited export market opportunities for the US, said UNCTAD. Any trade concessions they grant would mean little to the United States, while potentially reducing their own revenue collection, it cautioned. The latest edition of UNCTAD’s Global Trade Update, titled “Escalating tariffs: The impact on small and vulnerable economies”, said that in recent months, the United States has introduced trade measures that have transformed the current trade landscape. In this regard, the report provides a timeline of the US trade policy decisions and an analysis of the impact of the “reciprocal tariffs” on small and vulnerable economies. Among the key takeaways from the report are that small and Least Developed Countries represent a marginal share of the US trade deficit. For example, 28 of the affected trading partners each contribute less than 0.1% of the total US trade deficit. Yet, imposing “reciprocal tariffs” will disproportionately affect their ability to export to the US market, said UNCTAD. Another key point highlighted in the report is that most trading partners facing reciprocal tariffs would generate minimal additional revenue for the US, even if import volumes remain unchanged. For 36 of them, the new tariffs would generate less than 1% of current US tariff revenues. Major oil exporters, such as Guyana and Nigeria, would add very little, as oil is exempt from any additional tariffs, said UNCTAD. Similarly, UNCTAD said that reciprocal tariffs on countries that primarily export mineral products, such as Zambia and the Democratic Republic of Congo, would generate negligible additional revenue for the US but would further hinder their potential to diversify and add value to their exports. In a similar vein, several trading partners export agricultural commodities not produced in the US and for which there are few substitutes. For instance, in 2024, the US imported $150 million in vanilla from Madagascar, close to $800 million in cocoa from Cote d’Ivoire and $200 million in cocoa from Ghana, said UNCTAD. Increasing tariffs on such goods may raise some additional revenue but will also likely increase consumer prices, it pointed out. UNCTAD said in recent months, the United States Executive has imposed import tariffs at or above 10 per cent to imports from all over the world, justified by existing United States laws. According to the UNCTAD report, some of the legislation that has served as a basis is the following: * The International Emergency Economic Powers Act (IEEPA) grants the President broad authority to regulate various economic transactions following a declaration of a national emergency. Under IEEPA, the United States Executive can implement tariffs in response to a national economic emergency, in accordance with United States trade law. Based on IEEPA, 10 per cent across-the-board tariffs are in place from 5 April 2025. * Section 232 of the Trade Expansion Act of 1962 allows the President to impose tariffs on imports deemed a threat to national security. Tariff levels are determined after a Department of Commerce investigation is completed. This provision has been used to impose 25 per cent tariffs on imports of steel and aluminum into the United States. * Section 301 of the Trade Act of 1974 grants the Executive the authority to enforce trade agreements, solve trade conflicts, and increase access to foreign markets for US goods and services. It is the main legislation the United States uses to impose trade sanctions on countries that “violate trade agreements or engage in unfair trade practices.” * Section 604 of the Trade Act of 1974 enables the Executive to impose duties or restrictions on imports. This section has been used to implement “reciprocal tariffs” on trading partners. The UNCTAD report goes on to provide a timeline of the implementation of the new US trade measures ranging from the US administration first issuing its America First Trade Policy on 20 January 2025, the Presidential Memorandum on “Reciprocal Trade and Tariffs” introducing the “Fair and Reciprocal Plan” on 12 March 2025, to the announcement of reciprocal tariffs worldwide on 2 April 2025, which was followed by the additional 10 per cent reciprocal tariffs that became effective on 5 April 2025 and the additional country-specific tariffs that became effective on 9 April 2025 (a 90-day pause was later announced). The report noted that the United States has in place 14 free trade agreements (FTA) with 20 countries. Despite preferential duty treatment established in those agreements, US trading partners now face 10 per cent import duties, except for the products exempted in the 2 April 2025 Executive Order, it said. Likewise, United States-Mexico-Canada Agreement (USMCA) trading partners – Canada and Mexico – receive different treatment and their exports will not be subject to the 10 per cent tariff general rule. Beneficiaries of United States’ unilateral preferences, such as the African Growth and Opportunity Act (AGOA) are not exempt from reciprocal tariffs, meaning imports from these countries are now subject to additional 10% tariffs across the board, except for the exemptions contained in Annex II of the Executive Order. Moreover, until they were paused on 9 April, reciprocal tariffs, often considerably above 10 per cent would also have applied to AGOA beneficiaries, said the report. The report said the contribution to the United States’ trade deficit from small and Least Developed Countries included in the 57 trading partners listed in Annex I of the Executive Order is marginal. For instance, 28 of these trading partners each contribute less than 0.1 per cent of the total US deficit. Among the countries listed in the report with a contribution below 0.1 per cent of the US trade deficit are Angola (which faces a reciprocal tariff of 32 per cent); Lao People’s Democratic Republic (reciprocal tariff of 48 per cent); Madagascar (reciprocal tariff of 47 per cent); Mauritius (reciprocal tariff of 40 per cent); Fiji (reciprocal tariff of 32 per cent); Namibia (reciprocal tariff of 21 per cent); Vanuatu (reciprocal tariff of 23 per cent); and Nauru (whose contribution to the US trade deficit is 0.000 per cent but faces a reciprocal tariff of 30 per cent). However, imposing “reciprocal tariffs” on them will disproportionately affect their ability to export to the US market, said the report. The UNCTAD report said that some trading partners listed in Annex I of the Executive Order are very small and/or economically poor with very low purchasing power. 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, it added. For instance, Annex I includes 11 of the 44 trading partners classified by the United Nations as “Least Developed Countries”, many of which rely on tariffs for domestic revenue collection. According to the report, among the Least Developed Countries facing higher reciprocal tariffs that offer little export prospect to the United States include Madagascar, Malawi, Mozambique, Chad, Lesotho, Bangladesh Cambodia, and the Democratic Republic of the Congo, among others. Most trading partners facing reciprocal tariffs would generate only minimal additional revenue for the United States, even if US import levels remain unchanged, said the report. “Reciprocal tariffs” of 10 per cent in place since 5 April 2025 may reduce demand for many imported goods as a result of higher prices, it noted. “However, even if after the introduction of tariffs, import levels were to remain unchanged at 2024 levels, the additional tariff revenue collected from poorer and smaller economies would be minimal compared to current customs duty revenues.” The report said that for 36 of the 57 trading partners listed in Annex I of the Executive Order, the new specific “reciprocal tariffs” would generate less than 1 per cent of the United States’ current tariff revenues. Moreover, Annex II of the Executive Order includes goods that are excluded from tariffs, and therefore would not produce any revenues for the United States. For instance, the reciprocal tariffs would produce very little revenues from major oil exporters, such as Guyana and Nigeria, as oil is exempted for any additional tariffs under Annex II of the Executive Order, said the report. Similarly, for several countries that primarily export mineral products – or any other product listed in Annex II – the effect of the reciprocal tariffs would be negligible in terms of raising US revenues. For instance, it said imposing high reciprocal tariffs on Zambia and the Democratic Republic of the Congo would generate minimal revenue for the United States, while further hindering their potential to diversify their exports and add value to their export bases. Several of the trading partners listed in Annex I of the Executive Order export agricultural commodities that are not produced in the United States and for which there are few substitutes, said the report, citing examples that include Madagascar’s vanilla and cocoa from Cote d’Ivoire and Ghana. It said increasing tariffs on such goods, while generating some revenue, is likely to result in higher prices for consumers. For instance, in 2024, the United States imported vanilla worth approximately $150 million from Madagascar; cocoa imports from Cote d’Ivoire were close to US$800 million, while imports from Ghana were about US$200 million. CONCLUSION The report said the US policy of “reciprocal tariffs” has imposed new and burdensome market access conditions, disproportionately affecting small, vulnerable economies and Least Developed Countries. The current 90-day pause offers an important opportunity to reassess how these countries are treated under this policy framework, it suggested. The report said many African countries, for instance, have benefited from preferential market access through initiatives like the African Growth and Opportunity Act (AGOA), while small economies involved in US free trade agreements contribute only negligibly to the US trade deficit. It said that imposing tariffs on their exports would not contribute to boost US revenue collection but it would disproportionately harm these vulnerable economies. This is a critical moment to consider exempting such countries from tariffs that offer little to no advantage for US trade policy while potentially causing serious economic harm abroad, the report concluded. +
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