With major economies set to impose sweeping new tariffs following those announced by the US last week, intergovernmental organisation UN Trade and Development (Unctad) has cautioned that the global trade system is entering a critical phase, threatening growth, investment and development progress, particularly for the most vulnerable economies.

“This hurts the vulnerable and the poor. Trade must not become another source of instability. It should serve development and global growth,” Unctad secretary-general Rebeca Grynspan emphasises.

The organisation says that unpredictability and uncertainty in trade and investment is impeding growth and planning for businesses and policymakers

Just ten of the nearly 200 US trade partners account for almost 90% of its trade deficit, Unctad points out; however, least developed countries and small island developing States – responsible for just 1.6% and 0.4% of the deficit, respectively – are being affected.

Tariffs on these partners will neither help balance the trade deficit nor generate significant revenue, Unctad asserts.

Many low-income economies now face a “perfect storm” of worsening external conditions, unsustainable debt levels and slowing domestic growth, the entity points out.

Unctad highlights the need for trade reform and calls for the solution to emerge through dialogue and negotiation. It adds that trade imbalances, concentrated gains and outdated rules must be addressed, without sacrificing those least responsible.

“This is a time for cooperation – not escalation. Global trade rules must evolve to reflect today’s challenges, but they must do so with predictability and development at their core, protecting the most vulnerable,” Grynspan says.

Unctad has called on decision-makers to urgently reconsider the tariffs imposed on the vulnerable countries.