Trump’s tariffs and the threat to global trade: A wake-up call for developing economies

The world has witnessed a sharp resurgence of protectionist trade policies, most notably under the leadership of US President Donald Trump. His administration's imposition of sweeping unilateral tariffs on a wide range of industrial goods marked a severe deviation from the decades-long trajectory of global trade liberalisation. 

While such actions are framed as necessary for protecting American industries or correcting trade imbalances, they have far-reaching implications for the entire global trading order. 

Most significantly, these measures pose a systemic threat to developing and least developed countries (LDCs), including Bangladesh, that rely on predictable, rules-based trade regimes to sustain economic growth and development.

From multilateralism to unilateral disruption
To grasp the magnitude of Trump's protectionist pivot, it is essential to understand the foundational principles of the post-Second World War trading regime. The General Agreement on Tariffs and Trade (GATT), established in 1947, and later succeeded by the World Trade Organisation (WTO) in 1995, sought to promote trade through non-discrimination, reciprocity, transparency, and fairness. 

Through successive negotiating rounds—from Dillon and Kennedy to the Uruguay Round—tariff barriers were systematically reduced, resulting in the integration of developing economies into the global marketplace.

The WTO's establishment institutionalised these gains. It introduced a legally binding dispute settlement mechanism, enabling even small countries to challenge unfair practices by larger trading powers. 

Tariff bindings, a key aspect of WTO commitments, provided exporters with certainty by locking in maximum tariff rates that could not be arbitrarily increased. This environment of stability allowed countries like Bangladesh to flourish, especially in sectors such as ready-made garments (RMG), which now account for more than 80% of the country's export earnings. 

The sector not only employs millions but also empowers women and supports broader socio-economic progress. Hence, any disruption in the multilateral trading framework has direct consequences for Bangladesh's developmental trajectory.

Trump's tariffs: Unilateralism over rules

Against this backdrop, the Trump administration's unilateral trade actions were unprecedented in both scale and intent. Using provisions under Section 232 of the Trade Expansion Act and Section 301 of the Trade Act, Trump imposed tariffs on steel, aluminium, and other goods from China, the EU, and even allies like Canada and Mexico. These actions bypassed WTO processes and undermined the principle of Most-Favoured-Nation (MFN) treatment, which ensures that WTO members extend equal trade advantages to one another.

These measures reflected a fundamental challenge to the rules-based order, replacing collective negotiation with coercive bilateralism. The rationale—often cited as national security or protecting American jobs—was widely criticised as a pretext for protectionism. The broader consequence was a rise in retaliatory tariffs, a slowdown in global trade, and increased volatility in international markets.

Moreover, the US stalled appointments to the WTO Appellate Body, effectively paralysing the dispute settlement mechanism by 2019. Once regarded as the 'crown jewel' of the WTO, the system now faces existential threats. Without a functioning dispute mechanism, countries lack a credible forum for resolving trade disputes—a development that disproportionately hurts LDCs like Bangladesh, which cannot afford trade wars or reciprocal sanctions. According to the WTO, over 60% of developing country disputes have been addressed through this body, proving its role as a leveller in an uneven global economic playing field.

Collateral damage: Bangladesh and the broader LDC context

The consequences of these developments have been particularly severe for countries like Bangladesh, whose economic model depends on predictable market access and tariff preferences. Bangladesh has long benefitted from preferential schemes such as the EU's Everything But Arms (EBA) initiative and the Generalised System of Preferences (GSP), which provide duty-free or reduced-tariff access to key markets. However, in a climate of rising protectionism and bilateralism, such schemes are increasingly vulnerable to political reinterpretation or revocation.

For Bangladesh, the concern is not merely about direct tariffs but also about the fragmentation of global supply chains. The country's integration into global value chains (GVCs), particularly in textiles, electronics, and pharmaceuticals, means any disruption reverberates through multiple layers of economic activity. For example, if a Bangladeshi factory exports yarn to Vietnam, where the final garment is assembled and then shipped to the US, any tariff on Vietnamese goods impacts the Bangladeshi supplier. These complex interdependencies mean that even indirect measures can deeply affect export performance, employment, and foreign exchange earnings.

Adding to the structural disadvantage is the problem of tariff escalation—wherein tariffs increase with the level of processing. Developed countries often impose low or zero tariffs on raw materials but high duties on processed or value-added products. This undermines Bangladesh's efforts to diversify its export base into higher-value sectors such as pharmaceuticals, leather goods, or electronics. The resulting disincentive traps many LDCs in primary production, inhibiting technological advancement and value chain upgrading.

Erosion of legal remedies and institutional safeguards

One of the most troubling outcomes of Trump's trade policy is the erosion of legal remedies previously available through the WTO. Under normal circumstances, countries like Bangladesh could challenge unfair trade restrictions through the WTO's dispute settlement body. However, with the system rendered largely inoperative, LDCs have no recourse to enforce their rights or seek redress. This power asymmetry deepens existing inequities in global trade.

Moreover, the paralysis of the Appellate Body undermines the credibility of the WTO itself. It signals to larger economies that they can flout global rules with impunity, setting a dangerous precedent that could unravel the entire multilateral system. For smaller nations like Bangladesh, this means being left vulnerable to the whims of larger powers, with few tools to protect their interests. The trust that underpinned decades of negotiated trade liberalisation is increasingly being replaced by uncertainty and unilateralism.

A wider threat to Sustainable Development Goals (SDGs)

Beyond trade and economics, the erosion of multilateralism also threatens progress on the UN's Sustainable Development Goals. Trade is not merely a vehicle for profit—it is integral to poverty reduction, job creation, gender equality, and access to health and education. In Bangladesh, trade-led growth has played a central role in lifting millions out of poverty and enhancing female labour force participation.

Protectionist measures that restrict market access or disrupt global supply chains risk reversing these gains. Goals such as SDG 1 (No Poverty), SDG 5 (Gender Equality), and SDG 8 (Decent Work and Economic Growth) are particularly at risk. Trade disruptions also impact SDG 9 (Industry, Innovation, and Infrastructure), as manufacturing sectors in LDCs struggle to scale due to limited access to technology, markets, and investment. As global trade contracts and investment confidence wanes, LDCs face the dual threat of economic marginalisation and social regression.

Reimagining a multilateral future: The role of Bangladesh

In this moment of crisis, there is an urgent need to revitalise the WTO and reclaim the core principles of multilateralism. Bangladesh, along with other LDCs, must assert its voice in global forums and advocate for a fairer, more inclusive trading system. Restoring the Appellate Body should be a priority, as should broader reforms to make the WTO more responsive to the unique needs of developing nations.

Bangladesh must also participate actively in WTO negotiations, particularly in areas related to e-commerce, investment facilitation, and services, which are increasingly shaping the global trade architecture. While historically concentrated on goods trade, Bangladesh must evolve with changing trade patterns to remain competitive.

Special and differential treatment, long a pillar of trade equity, must be preserved and expanded. Developed countries must honour their commitments to provide technical assistance, capacity building, and preferential access to LDCs. Bangladesh should also work to diversify its trade partnerships beyond traditional markets. Joining or leveraging platforms like the Regional Comprehensive Economic Partnership (RCEP), SAFTA, and BIMSTEC and strengthening South-South cooperation can offer new avenues for resilience.

Domestically, Bangladesh must also invest in enhancing its value chain capacity, upgrading industrial infrastructure, and improving compliance with international standards. This includes addressing non-tariff barriers (NTBs) such as product quality, safety standards, and labour rights—areas where global buyers are increasingly vigilant. At the same time, Bangladesh's policymakers must prioritise trade facilitation, customs modernisation, and efficient logistics to reduce transaction costs and enhance competitiveness.

Charting a new trade diplomacy for LDCs

Donald Trump's tariff war may have begun as a populist response to perceived domestic grievances, but its consequences have rippled far beyond American shores. For Bangladesh and other LDCs, the return of protectionism and the weakening of multilateral institutions represent a profound threat to decades of development progress.

At a time when global cooperation is needed more than ever to address climate change, pandemics, and economic inequality, retreating into trade unilateralism is both short-sighted and dangerous. The global trading system must be rebuilt on principles of equity, legality, and cooperation. Only then can we ensure that trade remains a force for sustainable development and shared prosperity.

As a rising voice in global trade, Bangladesh has both a stake and a role in shaping this future. The moment calls for bold, coordinated, and forward-looking trade diplomacy that places fairness, inclusion, and resilience at its core. The alternative is not merely diminished trade but diminished opportunity, dignity, and hope for millions across the developing world.

The time to act is now. The future of fair trade—and with it, the promise of inclusive global development—hangs in the balance.

Dr M Shawkat Alam is a professor of international law at Macquarie University, Sydney, Australia. He can be reached at: [email protected]. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.