President Donald Trump announced a suite of tariffs on Wednesday (2 April), claiming that they would address trade imbalances and bring manufacturing and jobs back to the US. The tariffs, framed as being ‘reciprocal tariffs’, are due to be implemented from 9 April, range from 10 percent to as high as 46 percent for Vietnam. Countries in Southeast Asia have been particularly targeted, with Cambodia facing 49 percent tariffs and Bangladesh hit by 37 percent.
Watch the video with Amrita Saha
Impacts of high tariffs
Since the announcement the stock value of several US companies declined sharply, with Nike shares falling by 14.5 percent. Combined with the severe cuts to USAID, there is also concern about what impact the high tariffs will have on lower—middle-income country economies and in turn, the investment available for development in areas such as public services, health and education.
Read the paper: Politicisation and the Role of Business in Trade Negotiations
In response, Amrita Saha, Research Fellow at the Institute of Development Studies, who studies the impacts of trade on development, said:
“US reciprocal tariffs are causing a major upheaval in global trade. The blanket 10 percent tariffs on all US imports are in breach of the Most Favoured Nation principle of the WTO. The new US tariff policy seems driven by its level of trade deficit paying no heed whatsoever to the caution from trade economists that ultimately there are no wins in a trade war.
“The most significant economic costs will be within the US itself – as workers and consumers will pay more and we might even see a weakening of some big US brands like Apple or Nike. While China faces one of most prohibitive tariffs, Southeast Asian nations are hit particularly hard.
“Thus far, there is no sight of development imperatives and no clarity on unilateral preferences or the African Growth and Opportunity Act (AGOA). Following in the wake of US aid cuts, there is a clear disdain of impacts for low-income economies.
“Closer home, countries like the UK hit at 10% (and possibly India, hit at 26%) might not retaliate directly but try and mitigate the effects through bilateral trade agreements. However, the impact of the cumulative of the new tariffs together with those on auto and steel will lead to significant labour market effects with job losses for both economies.
“While it remains to be seen how exactly these new tariffs cause ripples worldwide, it is clear that tariff uncertainty will continue, and we should expect more changes as countries respond and interest groups weigh in both in the US and globally.
“We can expect that in this new Trump era, we are in a world where navigating commercial diplomacy will dominantly shape supply chains and even the future of how we think of trade and development. We will need to learn how we strategically engage while working with a diversity of views. We can expect that new types of coalitions will emerge, where perhaps the EU/UK (still believing in trade rules) can step up and form new and more equitable partnerships with BRICS countries and the Middle Eastern and African partners.”
A new IDS report provides evidence on the impacts of tariffs implemented during President Trump’s first term in office, particularly on India.
Also highly relevant in the current climate is the new IDS working paper on ‘Politicisation and the Role of Business in Trade Negotiations‘.
If you are interested in business and its growing relevance to international development, find out more about studying for a Masters degree in Globalisation, Business & Development at IDS.
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