US President Donald Trump’s decision to delay implementing major tariff hikes on most trading partners may have offered some relief, but the extension is also prolonging global trade uncertainty, the UN warned Tuesday.
Days before the three-month pause on his “Liberation Day” tariffs was set to expire, the US president said Monday he would give trading partners an extra three weeks to hammer out deals to avoid paying sky-high levies for their exports to the world’s biggest economy.
Trump had unveiled sweeping tariffs on imports on April 2, including a baseline 10 per cent tariff on all countries, but following market turmoil, he quickly suspended tariffs above 10 per cent until July 9.
But prior to that deadline, he sent out letters to more than a dozen countries — including top trading partners Japan and South Korea — setting out what he had decided to charge if they did not reach agreements by a new August 1 target date.
Pamela Coke-Hamilton, director of the United Nations-backed International Trade Centre, told reporters in Geneva that the extension was not necessarily good news.
“While the reciprocal tariffs will no longer go into effect tomorrow as originally announced, but be (postponed) for another few weeks until first of August, this move actually extends the period of uncertainty,” she said.
That in turn risks “undermining long-term investment and business contracts and creating further uncertainty and instability”.
Predictability, she said, is the “one thing businesses need more than anything else”.
“If the sand keeps shifting, there’s no way that you can make firm decisions for your business.”
– ‘Perfect storm’ –
Coke-Hamilton stressed that the United States was not the only country piling on new trade restrictions.
“These changes in the trade landscape are part of a bigger trend,” she said, pointing out that since the start of the year, her agency has “tracked more than 150 restricted trade measures that have been introduced globally”.
“These measures layered on top of a general decline in world trade since the onset of the war in the Ukraine, with its related supply-chain disruptions, insecurity and rising commodity prices have put strains on all economies.”
At the same time, spending on development assistance and aid has fallen off a cliff.
“In today’s context, a perfect storm is brewing,” Coke-Hamilton said.
While the global trade uncertainty and the US tariffs were clearly taking their toll on developing countries, she said there were actions they could take “to restore a sense of stability and predictability, and even find new opportunities to grow”.
Those included focusing more on strengthening regional value chains and striving to process goods in-country before export to retain more value, as well as boosting their small businesses.
She also highlighted that markets besides the United States could become more attractive, pointing to China’s recent announcement that it would give African countries tariff-free access to its market.
“That is a major, major, major development, and it can swing things in a way that was not anticipated three months ago,” she said.
Coke-Hamilton cautioned, though, that the United States itself might suffer from the tariff turmoil.
“I think in the long run, it will have a negative impact on the US economy,” she said.
“I’m not clear on what the plan is… I presume there is one. But from my perspective, at this point, I don’t see a win here in the long term.”
AFP
