UN Trade Official on Trump Tariffs, Global Economic Impact, and AI

Impact of Proposed Tariffs on Global Trade

• ⚠️ Uncertainty is identified as the primary issue paralyzing investment, trade, and growth due to potential tariffs.
• 📉 Least developed countries could see their exports impacted by as much as 54% if proposed tariffs are enacted.
• 🌍 For African countries, the impact is compounded by the potential loss of preferential access to the US market, such as through the AGOA.

Shifting Supply Chains and Market Access

• 🔄 The "China plus one" supply chain strategy, which previously benefited countries like Vietnam and India, is now evolving.
• 🇨🇳 China is offering free access to African countries, potentially expanding its trade as the US market becomes less accessible.
• painful process for countries to substitute the US market with others due to production and product differences.

Layered Effects of Tariffs and Inflation

• 📈 Tariffs have a layered effect, with a general 10% tariff, loss of preferential access, and reciprocal tariffs significantly reducing exports from vulnerable countries.
• 🔗 The disruption extends to the value chain, as many countries buy inputs from the US for their exports, which are also impacted by tariffs.
• 🛍️ Increased prices on imported goods in the US, such as apparel and footwear, are already being observed, with further inflation likely if tariffs are widely implemented.

Global Economic Outlook and Investment Trends

• 📉 Foreign trade and investment have fallen for the second consecutive year, with expectations for 2025 to be worse than 2024.
• ⏳ CEOs are adopting a "sit and wait" approach due to a lack of predictability and trust, crucial for trade and investment.
• 📊 While trade volume saw a slight increase, the growth has lost steam, and this tendency is expected to deepen if the trade war continues.

Disruptions to Key Trade Routes

• 🚢 Maritime transport, accounting for 80% of global trade, is significantly affected by disruptions in key arteries like the Red Sea.
• 💰 Attacks in the Red Sea have increased insurance and shipping costs, leading to longer routes and a projected 0.6% increase in global prices.
• 🌍 The impact of these disruptions will hit developing countries harder due to their external accounts and potential currency depreciation.

Artificial Intelligence and Global Development

• 🚀 Artificial Intelligence (AI) has the potential to improve productivity and allow countries to leapfrog development stages.
• 🔑 The main challenge is ensuring the benefits of AI are distributed more equitably, particularly for developing countries lacking data, capacity, or infrastructure.
• 🤝 Multilateral development banks and private sector investment are crucial for developing countries to catch up in AI infrastructure, training, and data harnessing.