Exporters from developing countries often face higher tariffs on finished goods than on raw materials, discouraging value addition, industrial growth and job creation.

The creation of a rules-based global trading system has contributed to a gradual, steady decline in tariffs — border taxes on imported goods — helping to boost international trade. In 2023, about two thirds of global trade was tariff-free.

But for the remaining third, tariff levels are still high and disproportionately affect developing economies, making their exports less competitive in global markets.

According to the latest Global Trade Update from UN Trade and Development (UNCTAD), exporters from developed countries faced tariffs averaging 1.9% in 2023, compared to 3.9% for exports from Latin America and South Asia, 3.3% from East Asia and 1.9% from Africa. African exports generally face lower tariffs in developed country markets due to preferential trade agreements.

Tariffs hit agriculture and manufacturing hardest

In agriculture, exports from developing countries often face high tariffs, especially under most-favoured-nation treatment – the standard terms offered to all countries unless a special trade agreement applies.

In manufacturing, rates vary, but key exports like textiles and apparel face tariffs around 6%, hindering the competitiveness of many low-income countries.

‘Tariff escalation’ poses a structural barrier to economic development

How tariffs are applied also matters. Many developing countries face “tariff escalation” – when processed or finished goods are taxed more than the raw materials used to make them.

This discourages industrial growth in developing economies, keeping them stuck as suppliers of raw material and limiting opportunities for value addition, job creation and economic diversification.

The practice is prevalent in most sectors, including those that are key to many developing economies, such as apparel, animal products, tanning and light manufacturing.

Regional trade offers path forward

The report notes that regional value chains could offer developing countries opportunities. Tariff margins tend to be more favourable within regional blocs, where demand is also rising.

Africa, for example, sees a 4.6-point advantage in intraregional trade, while Latin America gains a 3-point margin. Still, internal barriers persist: Africa and South Asia maintain some of the highest intraregional tariffs. In some cases, African exporters face lower tariffs in developed markets than within their own region.

A persistent drag on development

Despite decades of trade liberalization, tariffs still restrict market access, discourage value-added production and slow economic transformation in many developing countries.

Understanding how tariffs shape trade and development is essential to crafting policies that drive sustainable growth and development.