US Tariffs: The maximum increase in tariffs announced by US President Donald Trump majorly target emerging economies, particularly in Asia, said a report by Systematix Research. The report highlighted the analysis of regional averages showed that Southeast Asia faces the steepest rise in tariffs, followed by countries in Eastern and Continental Europe, and the Middle East.
The report read, “The maximum increase in tariffs is on emerging economies, particularly in Asia and Eastern Europe, with Southeast Asia, followed by Eastern and Continental Europe, and the Middle East.”
The so-called “Liberation Day” tariff shock is expected to have a deep impact on emerging markets (EMs), making the post-2008 experience of rising protectionism relevant once again.
The report also highlighted a number of economic challenges that these economies could face as a result of increased tariffs. These include a narrowing of the growth differential between emerging markets and the rest of the world, a slowdown in real household incomes, and a widespread fall in savings and investment rates.
Additionally, rising public debt, weak performance by the private sector, and a fall in both Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) are highlighted as likely consequences.
US Tariffs: What Else The Report Said?
The report also warned that every 100 basis point (bps) decline in global trade openness–measured as the sum of imports and exports relative to GDP–can lead to a 200-600 bps fall in per capita income and a 123 bps drop in productivity for emerging markets.
It said, “For the EMs, every 100bps decline in global trade openness (imports+exports/GDP) results in a 200-600bps decline in per capita income and a 123bps loss in productivity”.
The weighted average tariff for the 52 major countries targeted–who together contribute 66% of US imports–has been pegged at 34.6%. In comparison, the remaining 170 countries, which contribute just 0.2% to US imports on average, face a minimum tariff of 10%.
For India, the report stated that the rise in global protectionism is expected to lead to slower private capital expenditure, reduced job creation, a decline in household disposable income and real consumption, and a further increase in both public and household debts.
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