Small and vulnerable economies severely threatened by new US Tariffs

The April 2025 edition of the UNCTAD Global Trade Update provides a first analysis of the impact of the “reciprocal tariffs” recently adopted by the United States, concluding that these additional customs duties, targeting a total of 57 trading partners, risk to greatly hinder the growth as well as the potential to diversify and add value to exports of small and vulnerable economies.

The United States has currently in place 14 free trade agreements (FTA) with 20 countries. In Africa, Morocco is the only African country to have an FTA with the US. Despite the preferential duty treatment established in those agreements, all the counterparts will face a baseline 10 per cent customs duty pursuant to the Executive Order of 2 April 2025, except for the products listed in Annex II, which are exempted. These include for instance graphite, copper ores and concentrates, cobalt ores and concentrates, titanium and other rare earths, as well as petroleum and gas and some timber and wood products. In contrast, the 57 countries and customs territories (such as the European Union) listed in Annex I of the Executive Order will be subject to higher tariffs (called "reciprocal tariffs") that have been calculated on a one-to-one basis, dividing the trade deficit that the United States has with each of them by the total imports from every partner, and then dividing the result by two. In the case of Africa, reciprocal tariffs range from 11% for Cameroon to 50% for Lesotho. However, on 9 April President Trump announced a 90-day pause, substantially lowering reciprocal tariffs applied during this period to 10 per cent for all countries, except China. This period goes from April 9, 2025 to July 8, 2025. On the other hand, Canada and Mexico receive different treatment and their exports will not be subject to the 10 per cent tariff general rule if they are compliant with the USMCA (United States Mexico-Canada Agreement) rules.

The UNCTAD report finds that the reciprocal tariffs introduced by the 2 April Executive Order will disproportionately affect most of small and vulnerable economies, such as Less Developed Countries (LDCs), which currently represent a marginal share of the US trade deficit. These tariff increases, the report argues, will reduce the overall US trade deficit by a negligible amount. Moreover, it is doubtful whether they will be able to rebalance the trade deficit with each of these countries, since small and vulnerable economies have a very low purchasing power, hence limited ability to purchase US-made goods. The report calculates that 28 of the countries affected by reciprocal tariffs each contribute less than 0.1% of the total US trade deficit. Lesotho is a case in point. Hit by the highest tariff increase (50%), the small African country contributes to the US deficit only for 0.019% of the total.

In conclusion, UNCTAD believes that imposing additional tariffs on small and least developed countries will result in some of them slowing their growth prospects. In Africa, this scenario is particularly worrying especially for countries that export mainly mineral products, such as Zambia and the Democratic Republic of Congo. These countries risk losing the ability to diversify and add value to their exports due to the fact that the tariff exemptions mainly concern raw materials and goods produced with minimal processing (e.g. metal ores and concentrates), while products with higher added value that are obtained from such commodities will be hit with the additional import duties.

In contrast, many of the agricultural commodities exported from Africa to the United States that are not produced there (and for which there are few substitutes) will cause significant consumer price increases for U.S. citizens, including on a large number of finished products that are further processed from them. Examples are vanilla, which the United States imports heavily, especially from Madagascar (US$150 million were imported only from this country in 2024), and cocoa, which the U.S. imported from Côte d'Ivoire and Ghana to the tune of $800 million and $200 million, respectively, in 2024.

The report concludes by urging the U.S. government to exempt small and least developed countries from tariff increases, explaining that increasing tariffs on these economies will bring little or no benefit to the US trade policy, while risking serious economic damage to them.