The recent tariff increases by the U.S. administration highlight the critical role of sustainable economic and industrial development as a strong industrial base is essential for job creation, income generation, and social progress.

Industrial policy is on the agenda again; however, in a period of stagnant international trade, the imposition of tariffs presents significant challenges to global economic development and industrial growth, particularly for developing and least developed countries since tariffs undermine their potential to fully participate in global trade and hamper their efforts to diversify and modernize their industrial sectors. For many developing nations, particularly UNIDO’s Member States, integrating into global production networks and moving up the value chain will become significantly more challenging.

Recent estimates indicate that 450 million people work in global supply chains. A rise in protectionism in advanced countries will slow down industrialization efforts and impede poverty reduction by limiting job creation and economic opportunities. The negative effects of increasing tariffs will affect not only already vulnerable countries but also the very countries implementing tariffs, exacerbating geopolitical tensions and uncertainty.

UNIDO asserts that these measures take the wrong approach — particularly as their calculation and implementation are not grounded in evidence to achieve the intended outcome. By driving up the cost of industrial production, these tariffs undermine economic efficiency, diminish the benefits of trade, and weaken competitiveness, ultimately putting jobs at risk worldwide, thereby affecting the most vulnerable countries the hardest:

Five of the ten countries facing the highest tariff increases are LDCs. For example, according to the International Trade Centre (ITC), 35% of Cambodia's exports go to the US, accounting for more than a third of the Least Developed Country’s Gross Domestic Product. For Lesotho and Madagascar, the U.S. market accounts for 27% and 18% of exports, respectively.

“Rather than erecting barriers to industrial trade, a fairer and sustainable global economy should be the goal”, said UNIDO Director General Gerd Müller. “The USA’s withdrawal from development and economic cooperation and shared responsibility has set a dangerous chain in motion, with other industrialized countries reducing their commitments. Instead of cutting development budgets and now aggravating the situation by turning to economic protectionism and raising tariffs, the U.S. and all industrialized countries must work together with developing countries to create win-win situations and build a fairer and more sustainable global economy that ensures long-term prosperity for all”.

He continued: “I just returned from West Africa where our partners and I discussed the current U.S. tariff policy measures and the worrying impact on industrial and economic development, including on key industries such as textile and food. UNIDO continues to stand with its Member States, and to support them in diversifying their economies, strengthening local and regional trade and building greater resilience to external shocks, while promoting a fair global trade, that allows developing countries and in particular least developed countries to prosper.”

In its 2025 economic forecast published on 17 April 2025, the World Trade Organization (WTO) predicted a 0.2% decline of global trade - 2.9 percentage points less than baseline - due to the impact of the U.S. tariffs and the uncertainty around future trade relations with the U.S.. Furthermore, and even with the current 90-day moratorium on some of the increased tariffs, with the exception of those imposed on China (and still with an overall 10% increase for all countries), the downside risk of reciprocal tariffs and wider uncertainty could lead to a sharper decline of 1.5% in global trade.

These tariff policies will reduce trade in essential industrial inputs, disrupting global production chains, limiting countries' ability to diversify and specialize in areas of expertise and make goods more expensive for consumers. Rather than erecting barriers to industrial trade, a more equitable and sustainable global economy should be the goal. Key elements of such an international order include:

• Providing only limited and targeted protection for industries that require nurturing, allowing them to develop and compete effectively.

• Sharing and leveraging advanced technologies and innovation to address global challenges, such as poverty, climate change, and resource depletion.

• Strengthening collaboration in policy coordination and best practices between developed and developing countries to harness sustainable and green industrial production.

• Utilizing international arbitration mechanisms and the UN to establish a fair and transparent tariff system.

Protectionism is not the answer to solving today’s challenges; instead, UNIDO calls for the strengthening of global partnerships towards a more just international trade system, where all countries, especially developing and least-developed countries, can fully benefit from the global economy.