Trade should create opportunities for all because it is a driver to development.
The world economy is on a recessionary trajectory, driven by escalating trade tensions and persistent uncertainty, UN Trade and Development (UNCTAD) alerts in its new report, “Trade and Development Foresights 2025 – Under pressure: Uncertainty reshapes global economic prospects”.
While global trade reached a record $33 trillion last year, the outlook for 2025 remains uncertain. The report says developing economies like Uganda face risks and worsening external conditions, but growing South-South trade and greater regional economic integration are opportunities.
The question however is that when developing countries trade among themselves, what kind of tariffs will they apply to each other.
Luz María de la Mora, Director of UNCTAD’s Trade Division says it just makes sense for those countries to ensure that they make conditions that foster economic activity among themselves.
She warns against a rise in protectionist measures similar to what President Donald Trump announced recently.
UN Trade and Development (UNCTAD) calls for greater international policy coordination and strengthened regional trade.
It has also suggested that vulnerable and small economies, whose activities have a negligible effect on trade deficits, should be exempt from new tariff hikes because they are grappling with low growth and mounting uncertainty.
In another report released on 14 April, UN Trade and Development (UNCTAD) is upping calls that the poorest and most vulnerable economies be exempt from “reciprocal tariffs”.
Such tariffs, currently on pause for 90 days, were calculated at rates to balance bilateral merchandise trade deficits between the United States and 57 of its trading partners.
The report, entitled “Escalating tariffs: The impact on small and vulnerable economies”, finds that in many cases, reciprocal tariffs risk devastating developing and least developed economies, without significantly reducing US trade deficits or increasing revenue collection.
Most vulnerable economies at risk
The 57 trading partners concerned – 11 of them least developed countries – contribute minimally to US trade deficits, UN Trade and Development notes.
The spectre of low growth
Despite a slightly stronger-than-expected growth performance of 2.8 per cent in 2024, the global economy is set to slow down in 2025.
UNCTAD estimates that the world gross product will expand by only 2.3 per cent in 2025, below the threshold of 2.5 per cent – a marker of a global recessionary phase.
This is a significant deceleration compared to the average annual growth rates registered in the pre-pandemic period, which itself was a period of subdued growth globally.
Global trade tensions escalate
Rising trade tensions are impacting global trade, with UNCTAD noting that recent tariff measures are disrupting supply chains and undermining predictability.
“Trade policy uncertainty is at a historical high,” the report notes, “and this is already translating into delayed investment decisions and reduced hiring.” Already accounting for about one third of global trade, “the potential of South-South economic integration offers opportunities for many developing countries,” the report notes.
Policy options
UNCTAD urges dialogue and negotiation, alongside stronger regional and global policy coordination, building on existing trade and economic ties. “Coordinated action will be essential to restore confidence and keep development on track,” the report concludes. Global macroeconomic outlook
The outlook for the global economy is increasingly worrying.
The initial optimism at the beginning of 2025 regarding a dynamic expansion of the economy in the United States – largely driven by expectations of a short-term boost from corporate tax cuts, deregulation measures and monetary easing – is tempered by the abrupt shifts in trade and immigration policies, which are already generating significant negative supply shocks.
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