Sparing the Vulnerable: Why New US Tariffs Risk Stifling Development Gains
Vulnerable Economies at a Crossroads
A new United Nations Trade and Development (UNCTAD) report warns that the latest round of unilateral US tariff increases could severely disrupt exports from least developed countries (LDCs), small island developing States (SIDS), and landlocked developing countries (LLDCs)—collectively referred to as vulnerable economies.
These countries already contribute just 2.7% to global exports, despite accounting for over 16% of the world’s population. Their progress has stagnated over the past decade, and the new tariffs risk reversing even these limited gains.
US Tariffs: Small Source of Revenue, Big Consequences
Though vulnerable economies represent a tiny share (0.3%) of the US trade deficit and contribute minimally to US tariff revenue, they are disproportionately affected by the recent tariff increases.
Only 1.1% of exempted imports from the US’s 2025 tariff revisions come from vulnerable economies. This means that the vast majority of their exports will now face higher costs when entering the US market.
Tariffs Layered and Unequal
New US tariffs are multi-tiered and include:
- Baseline increases for all countries (+10%)
- Sector-specific tariffs (e.g. +25% on steel/aluminium)
- Country-specific tariffs as high as 50%, especially targeting vulnerable exporters
Some of the hardest-hit countries include:
| Country | Tariff Rate | Classification |
| Lesotho | 50% | LDC |
| Cambodia | 49% | LDC |
| Madagascar | 47% | LDC |
| Guyana | 38% | SIDS |
| Bangladesh | 37% | LDC |
These tariffs are on hold until July 2025, but their potential implementation looms large.
Development Risks and Sectoral Impact
- Only 7% of LDC exports to the US are currently exempt.
- Tariffs fall heavily on value-added exports like textiles, machinery, and metals, jeopardising industrialisation efforts.
- Trade-weighted tariffs on LDCs could reach nearly 44%, compared to the 5–7% tariffs these countries impose on US imports.
Moreover, dozens of vulnerable economies are at risk of losing preferential trade margins, undermining their competitiveness and export-led growth strategies.
A Call for Sensible Trade Policy
UNCTAD urges the US and global trading partners to reconsider the structure and application of new tariffs. The developmental harm vastly outweighs the marginal economic benefit to the US to already struggling economies.
Trade must remain a lever for inclusive development, not a barrier to it.
What Can Be Done?
International Trade and Research Centre supports the following recommendations drawn from the report:
- Extend exemptions for vulnerable economies, especially for key value-added sectors.
- Harmonise and simplify tariff structures to ensure transparency and predictability.
- Bolster multilateral efforts to protect Special and Differential Treatment (SDT) provisions in the WTO.
- Accelerate Aid for Trade and technical assistance to support export diversification.