Price of Exclusion in a Divided Trade System

by Muhammad Asif NOOR

The structure of global trade is under growing strain, and the latest U.S. tariff actions have widened existing cracks. A recent report by the United Nations Conference on Trade and Development offers a detailed look into how new tariff escalations by the United States are shaping the trajectory of international commerce. Though the policy is being justified as a necessary defense of national economic interest, the evidence points to broader consequences that go beyond bilateral disputes. The burden is not evenly distributed, and the economic implications for weaker economies are serious.

The 2025 tariff announcements extend beyond China and now include over 22 developing economies, among them several classified by the UN as least developed. These economies together contribute a negligible portion to the U.S. trade deficit. In fact, the 44 least developed countries combined are responsible for less than 2% of that figure. Despite this, they face tariffs that in some cases now exceed 25%. These changes were not negotiated through multilateral platforms and deviate from existing trade agreements. The speed and scale of the changes raise questions about the longer-term direction of U.S. trade strategy.

The reaction from international organizations has focused on the disproportionate effects on smaller economies. Countries in Asia, Africa, and the Pacific, many of whom rely on limited export categories such as agriculture and textiles, are exposed to sudden cost pressures that reduce competitiveness and weaken their ability to maintain employment. Madagascar’s vanilla trade, Cambodia’s garment production, and parts of Latin America’s agricultural output are just a few examples of sectors already facing reduced demand. For these economies, the timing is particularly difficult. Many are still managing post-pandemic recovery, high public debt, and limited fiscal space.

Trade imbalances have long been a point of debate between developed and developing nations. What distinguishes the current environment is the pace of change and the absence of cushioning mechanisms for vulnerable economies. The new tariff structures introduce volatility that smaller countries are poorly equipped to manage. The effect is a reversal of progress in global trade inclusion. Industries that provided some measure of economic participation are now confronting an external shock they did not initiate and cannot offset.

From Washington’s perspective, this policy is intended to reduce dependence on foreign manufacturing, secure key supply chains, and address domestic employment concerns. These goals are politically popular and fit within a broader narrative of re-industrialization. There is a constituency within the U.S. that supports these moves, particularly in sectors affected by outsourcing. Still, the economic outcome is mixed. Small manufacturers and farming communities inside the U.S. have already started facing higher input costs. Soybean growers in the Midwest, for instance, are facing reduced export options. Manufacturing firms report delays and rising costs linked to new sourcing challenges. Economic growth forecasts for the U.S. have been adjusted downward.

This pattern reflects a shift away from previous trade liberalization models. Rather than seek broad-based mutual gain, the new environment seems more comfortable with selective engagement. There is little indication that multilateral institutions were engaged meaningfully in the decision-making process. The World Trade Organization’s authority in these matters has declined over recent years, and this latest development underlines that trend. UNCTAD’s report offers a reminder that unilateralism has ripple effects, especially when exercised by major economies.

Some governments in the Global South are reassessing their dependencies. There is growing interest in trade arrangements outside the traditional U.S.-Europe nexus. The expansion of BRICS and regional initiatives in Africa and Asia are early indicators of this change. These efforts may not offer immediate relief, but they point toward a more diversified future. The idea is to reduce exposure to decisions made elsewhere without consultation. Whether this shift can be sustained remains to be seen.

There are also issues of trade justice and historical responsibility. Many of the affected economies were encouraged for decades to integrate into global markets by focusing on labor-intensive exports. Technical assistance programs, donor strategies, and bilateral deals were designed to steer them toward this path. The sudden introduction of punitive tariffs without regard to the structural limitations of these economies creates the perception of a double standard. Developing countries are asked to abide by open-market principles, while the largest economies exercise strategic discretion.

The asymmetry is evident in how some trade agreements have been structured. African exporters face high tariffs on their goods, yet are often required to allow duty-free entry to processed imports. These arrangements reduce the policy flexibility of developing countries and make it harder to pursue industrial strategies. In effect, they remain tied to low-value segments of the supply chain while importing more expensive goods they could be producing. The current wave of tariffs adds another layer of imbalance.

There is also a reputational cost for the global system. When trade becomes a tool of selective enforcement, confidence in its fairness weakens. This is not only a concern for the smallest countries. Mid-sized developing economies, such as Indonesia or Nigeria, are watching closely. If they conclude that trade rules are contingent rather than consistent, their participation in global institutions may shift. That would have consequences for global growth and cooperation.

The U.S. administration has signaled its willingness to adjust some terms, but exceptions remain limited and case-specific. A more constructive approach would involve restoring dialogue platforms, offering exemptions based on vulnerability, and reintroducing safeguards for smaller exporters. Trade does not operate in isolation. It connects to climate adaptation, debt sustainability, and food security. Measures that fail to consider these linkages may solve one problem while creating several others.

This is not a call for one side to win over another. Economic relationships between nations vary in complexity. Strategic competition will continue to influence decisions in Washington, Beijing, Brussels, and beyond. However, those decisions need to be placed within a framework that recognizes responsibility and interdependence. Smaller economies may be limited in power, but their role in global supply chains and environmental sustainability is essential.

The road ahead depends on whether major economies see long-term advantage in rebuilding trust with smaller partners. That will require recalculating the real cost of policies that appear efficient on paper but fragment the trade system in practice.