Trump tariffs are a ‘disaster' for world's poorest countries

Yahoo

03-04-2025

President Donald Trump's new reciprocal tariffs are set to hit some of the world's poorest nations the hardest, putting their labor-intensive export industries at risk and diminishing one of the US's biggest economic advantages over rival China.
Cambodia was slapped with Asia's highest tariff rate of 49% in Trump's levies announced Wednesday. Garment manufacturing giant Bangladesh was hit with a 37% rate, while in Myanmar, where a devastating earthquake last week left more than 3,000 dead, the US imposed a 45% duty. The southern African nation of Lesotho received a 50% tariff, the highest of any country.
'Oh, look at Cambodia, 97%,' Trump said at the White House, drawing laughter as he pointed to the levy the US is subjected to from the Southeast Asian nation. 'They made a fortune with the United States of America.' The average Cambodian earns about $6.65 a day, according to World Bank data, less than a fifth of the global average.
The trade action may inflict further economic damage on the world's poorest countries at a time when Trump's administration has axed thousands of key aid contracts that for decades gave the US a presence across the globe. The impact of the gutted aid effort is already being felt in Myanmar and across Africa, while China is seen swiftly filling the void in places like Cambodia.
'It's such a disaster,' said Deborah Elms, head of trade policy at the Hinrich Foundation. 'Tariffs of nearly 50% overnight will be impossible to manage.'
Many of those countries had tariff-free access to the US as Least Developed Countries, she said, adding they may turn to markets in Europe, Japan and Australia in lieu of weak demand in places like China.
The US calculated the rates based on a formula that divides a country's trade surplus with America by its total exports, based on data from the US Census Bureau for 2024. That number was then divided by two, producing the 'discounted' rate.
The method meant Madagascar, one of the world's poorest countries and the biggest producer of vanilla, was hit with a rate of 47%.
Parks Tau, South Africa's trade minister, told reporters on Thursday that his team didn't understand how the US assessed that South Africa charges tariffs of 60%, with a 30% tariff to now be levied on Africa's biggest economy in retaliation. Pretoria's own calculations indicated a rate of 7.6%.
'We are speculating what the US is calculating this on, we assume it could include the trade balance, it could include other considerations, but at this point we're going to need clarity from the US as to how they arrived at the number,' he said.
In 2023, South Africa had a $4.2 billion trade surplus with the US, its second-biggest trading partner. Tau said the tariff on neighboring Lesotho 'literally will devastate' the country of 2.3 million people that relies on exports of diamonds and clothes.
Botswana, which relies almost exclusively on diamond exports, had a 37% tariff slapped on it even as its mines minister was in the US last month promoting sales of the gems in the world's biggest market for them. Ivory Coast, the world's biggest cocoa exporter, now has to contend with a 21% tariff.
The move marks an about-face in American trade policy following World War II that promoted economic integration as a means to help developing nations and advance Washington's interests abroad. In 2000, then-President Bill Clinton pushed through the African Growth and Opportunity Act, which provided eligible sub-Saharan African countries with duty-free access for more than 1,800 products.
Former President George W. Bush expanded it in 2004 and promoted initiatives that would help countries bring products to US consumers. That program is up for renewal, alteration or termination in September.
'African countries are being penalized for having trade surpluses, some of them achieved by pursuing export-driven development policies, as advised by the US,' said Yvonne Mhango, Bloomberg's Africa economist. 'Most African countries export raw materials to America. One of Trump's arguments for these tariffs is to bring back manufacturing jobs to the US. Slapping high tariffs on Africa is not going to help.'
For many nations, particularly in Asia, the rise of China disrupted their economic dependence on the US. Many cultivated ties with Beijing to draw badly needed investment and financing for infrastructure. That left many smaller countries feeling pressured to choose sides.
Cambodia, whose two biggest trade partners are China and the US, had already been veering toward Beijing, the country's largest source of foreign investment. Most of US-Cambodia total trade of $13 billion last year comprised manufactured goods like clothing and footwear made in Cambodia and sold to American consumers.
Cambodia's government spokesman Pen Bona said via text message he couldn't yet comment on the tariff, and the matter was being reviewed.
In Bangladesh, which is also heavily reliant on the US market for its garment exports, the government said it's looking at ways to lower tariffs in order to maintain its trade access.
'Bangladesh is reviewing its tariffs on products imported from the United States,' said Shafiqul Alam, press secretary to interim leader Muhammad Yunus. 'The National Board of Revenue is identifying options to rationalize tariffs expeditiously.'
Exporters in Sri Lanka, which suffered a sovereign debt default in early 2022 that triggered the worst economic crisis in the country's post-independence history, meanwhile warned they are unable to absorb the 44% tariff imposed on the island nation. The US is Sri Lanka's largest market, accounting for 23% of total exports in 2024.
Analysts questioned the fairness of the US tariff calculations, given the over-sized impact it had on the poorest nations.
'In particular, it punishes small developing countries like Cambodia that simply don't have the capacity to buy much from the US,' wrote Tommy Xie, head of Asia macro research at Oversea-Chinese Banking Corp.
It could also jeopardize funding from the International Monetary Fund for Sri Lanka, Pakistan and Bangladesh as it will make it harder for them to hit the targets set for them in bailout programs, Ankur Shukla, a Mumbai-based economist for Bloomberg Economics, said in a report.
Asian nations are also wary of a flood of cheaper Chinese goods in their markets as a result of the knock-on effects of higher US duties. China was charged a 34% reciprocal tariff rate — stacked on top of 20% duties Trump already imposed this year.
'China's attempts to find new markets for goods previously destined to US will have to go somewhere at least in the short term,' said Elms of the Hinrich Foundation. 'This is going to set up new tensions with neighbors.'
—With assistance from Andrea Tan, Arun Devnath and Ntando Thukwana.
(Updates with Bloomberg Economics report on risk to IMF funding in third-last paragraph.)
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