Collateral Damage: How The US-China Tariff War Harms The World’s Poorest Nations – OpEd

April 15, 2025April 15, 2025 Simon Hutagalung 0 Comments

Trade wars often go unnoticed, yet they significantly impact the world’s poorest countries. This deserves more attention. As the prolonged trade standoff between the United States and China extends into 2025, it is evident that some of the most severely affected economies are those with little involvement in the conflict. Least-developed countries (LDCs), already on the fringes of the global economy, are becoming collateral damage in this struggle between giants.

The trade war began back in 2018, rooted in U. S frustrations over trade imbalances and allegations of intellectual property violations. Though there was a temporary truce in 2020—the so-called Phase One deal—it didn’t hold for long. Tariffs have gradually reemerged, increasing with each new round. As of this year, U.S. duties on certain Chinese goods have surged to 145%. Meanwhile, China has imposed tariffs of up to 84% on American imports. The U.S. argues that these tariffs are essential for national security and economic fairness, while China views them as a form of disguised protectionism.

This ongoing back-and-forth has sparked a ripple effect that extends well beyond Washington and Beijing. In our increasingly interconnected world, trade wars are not isolated conflicts; they create shockwaves that impact supply chain markets and influence financial and commodity prices. When these waves strike, smaller, less resilient economies—such as many least developed countries (LDCs)—often find themselves overwhelmed.

Many less-developed countries (LDCs) were still recovering from the impact of the COVID-19 pandemic when trade tensions escalated again. Their economies typically depend on a limited range of exports, including raw materials, agricultural products, and low-cost manufactured goods like textiles. With few options to adapt, these countries are highly vulnerable to changes in global demand. Although China has emerged as a significant trade partner for many, especially in Africa, this relationship has not shielded them from the broader economic repercussions.

As global trade has slowed, the demand for goods from least developed countries (LDCs) has decreased due to low tariffs and uncertainty. This decline in demand has led to shrinking export revenues, which many governments rely on to provide basic services. Simultaneously, production costs have risen, particularly in countries that depend on imported components. When the prices of intermediate goods increase, factories face challenges, jobs are lost, and investments diminish. Consequently, foreign investors have become more risk-averse, choosing to invest in more stable markets. This trend has made it even more difficult for LDCs to attract the capital necessary for growth.

Supply chain disruptions have only made things worse. Many LDCs rely on access to global shipping routes and functioning infrastructure to stay competitive. However, with supply chains growing less predictable and costs of transportation on the rise, some countries are being priced out of the market. At the same time, volatile commodity prices have added another layer of instability. For countries that depend heavily on a few exports, even minor price swings can have outsized economic impacts.

An often-overlooked consequence has been the shift in Chinese exports. As China seeks to redirect its goods away from the U.S., it has increased its presence in global markets where the least developed countries (LDCs) were already struggling to compete. This heightened competition has pushed some of these countries even further to the margins. With exports declining and costs rising, many LDCs have been compelled to take on more debt. For nations already burdened by heavy loans, this has raised concerns about long-term fiscal sustainability and the risk of sovereign debt crises.

Still, not everything has been bleak. A few LDCs have managed to turn the disruption into opportunity. Countries with low labor costs and abundant raw materials—Vietnam and Ethiopia—have drawn some attention from companies seeking to move manufacturing out of China. This “China-plus-one” strategy has opened up modest investment flows to alternative production hubs. Additionally, China’s ongoing Belt and Road Initiative has continued to build infrastructure in some developing countries, which may improve their long-term trade prospects.

However, we should avoid overstating the benefits. These advantages have been inconsistent and unevenly distributed. For every country that has secured a new investment deal or factory, many others are still struggling with budget shortfalls, unemployment, and declining growth.

So, where does this leave LDCs? Vulnerable. Moving forward, these countries will need more than luck to weather the storm. Strategic steps, such as diversifying exports, building stronger regional trade networks, and improving infrastructure, will be crucial. Additionally, policies that support domestic industries and manage public resources wisely are essential. However, can reforms alone be sufficient? International cooperation—through financial assistance, fair trade deals, and inclusive dialogue—is vital for LDCs to avoid falling further behind.

The bottom line is that the U.S.-China tariff war began as a bilateral conflict, but its consequences extend far beyond that. The world’s poorest nations have suffered significant damage, and their recovery will require time, support, and a coordinated global effort. Without assistance, these countries risk becoming long-term casualties of a conflict they did not initiate.

The opinions expressed in this article are his own.

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