Much has been written on the escalation of the trade dispute. What hasn’t been discussed is what will be the impact on developing nations who rely on trade as an engine of economic growth for ending poverty. As tariffs are beginning to be imposed, my team analyzed the impact of these new tariffs and the potential for tariff escalation in developing countries in a new World Bank working document. We found that the new trade tariffs will depress bilateral trade, disrupt global supply chains, and increase demand for substitutes from developing countries.
In the current uncertain global business environment, all countries need to act to retain investor confidence and avoid the disruption of trade flows and global supply chains. Countries can improve the credibility of future policies by deepening their commitments in multilateral fora such as the WTO and regional trade agreements. The timely and clear communication of all future changes in trade policy are important to minimize policy uncertainty.