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The world’s poorest countries are facing a challenging situation due to the impact of Donald Trump’s tariffs and cuts to international aid budgets. This double blow is jeopardizing global efforts to eradicate poverty and address climate change, according to senior trade experts.
Pamela Coke-Hamilton, the executive director of the International Trade Centre in Geneva, has raised concerns about the detrimental effects of Trump’s proposed tariffs on countries like Lesotho, Madagascar, and Mauritius. These nations are already struggling to recover from the Covid-19 pandemic and the increasing costs of servicing their international debt.
The combination of a trade war and an aid war has created a “perfect storm” for these developing countries, said Coke-Hamilton. The situation is further exacerbated by the significant cuts to aid budgets, with USAID’s funding expected to nearly halve by 2026.
Charles Kenny, a senior fellow at the Center for Global Development, warned that the decline in aid contributions and global economic uncertainty could hinder efforts to attract international investments in developing countries. This could set back progress towards achieving the Sustainable Development Goals by 2030.
The recent United Nations conference in Seville aimed to renew support for the Sustainable Development Goals, but the absence of the US, which formally withdrew from the summit, has raised concerns about the future of global development efforts.
Analysts have noted that the conference’s communiqué has been watered down in key areas, such as commitments to phase out fossil fuels and manage developing country debt. Bodo Ellmers from Global Policy Forum Europe warned that the summit may miss the opportunity to steer the global development agenda in the right direction.
Joseph Stiglitz, a professor at Columbia University, highlighted the unsustainable debt burdens faced by many developing countries, which impede their ability to fund essential public services. The high interest rates charged by private lenders are exacerbating this issue, leading to a situation where a significant portion of the population in African countries is spending more on debt service than on health or education.
The International Chamber of Commerce is proposing reforms to address the barriers to lending for projects in developing countries. By making targeted clarifications to the Basel III framework, the ICC aims to unlock private investment opportunities for these nations, which account for a sizable portion of global GDP.
As the traditional development assistance model faces challenges, there is a growing need to explore alternative approaches that leverage the private sector to create sustainable solutions for global development. The International Chamber of Commerce believes that fostering local pools of capital through private sector initiatives could offer a viable path forward.
In conclusion, the current landscape of international aid and trade presents significant challenges for the world’s most vulnerable countries. It is crucial for global stakeholders to work together to address these issues and ensure that sustainable development remains a priority on the global agenda.
Additional reporting by David Pilling in London. Data visualization by Amy Borrett.
