A radical transformation in the international trade landscape, driven by drastic changes in US tariff policy, is redefining export competitiveness globally , with developing economies and least developed countries (LDCs) being the most exposed as they generally face larger tariff increases, the United Nations Conference on Trade and Development (UNCTAD) warned .

According to the most recent World Trade Update , the organization detailed that until 2024, access to the U.S. market was governed primarily by the World Trade Organization’s (WTO) Most Favored Nation (MFN) rules , where most trading partners faced similar tariffs. However, by early 2026, the average applied tariff had risen by almost 15 percentage points.

This change has reduced the proportion of imports subject to MFN or duty-free tariffs from 66% to just 20%, resulting in a highly differentiated tariff structure.

UNCTAD pointed out that competitiveness no longer depends solely on productive efficiency, but also on relative preferential margins , which shows how non-uniform tariff structures create advantages for some exporters and disadvantages for others.

In that regard, he cited the example of rice, whose US imports from Italy have become, on average, 12 percentage points cheaper than rice from other suppliers. Conversely, at the beginning of 2026, US imports of South African wine were approximately 17 percentage points more expensive relative to other countries than they were in 2024.

The report warned that developing economies and LDCs are the most exposed , since their exports are generally mostly to the United States.

While developed economies have managed to maintain or even improve their relative competitive position in sectors such as machinery and textiles, many developing nations face increasing obstacles, the analysis indicated.

In that context, for some LDCs, the average tariff increase has exceeded 35 percentage points , which worsens their ability to compete on price in the US market.

Nevertheless, the tariff disparity opens up specific opportunities. For example, countries like Cambodia (with rice) and Haiti (with men’s shirts) could benefit if their competitors face larger price increases.

The escalating tariffs remain a persistent barrier. One example is the cocoa supply chain: while raw cocoa beans enter the United States duty-free, tariffs on chocolate have risen significantly, making it difficult for producing countries like Ivory Coast, Ghana, or Ecuador to process their own raw materials for export.

Given this scenario, conditioned by geopolitical and economic factors, UNCTAD recommended monitoring changes in relative competitiveness , diversifying export markets to reduce dependence on restrictive unilateral policies, and taking advantage of preferential positions where agreements exist.

The report reveals how global trade has entered an era of strategic fragmentation, where the paradigm of a world market with uniform rules and low tariffs is being replaced by a complex chessboard, in which politics weighs as much as productivity.

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Following an increase in trade due to advance purchases before the implementation of the new tariffs, the United Nations Conference on Trade and Development (UNCTAD) estimated that global trade growth during the first half of 2025 could fall from 4% to between 2.5% and 3%, “with a slowdown on the horizon . ”

According to the Trade and Development Report 2025 , global economic growth is also projected to slow to 2.6 percent in 2025 , down from the pre-COVID-19 pandemic trend of 3 percent.

UNCTAD’s analysis indicated that economies such as the United States and Europe are slowing down, as is China, while “across the global south, financial volatility and weaker external demand are putting pressure on investment and employment.”

Given this challenging global outlook, developing economies will drive almost 70% of global growth in 2025 , but face the greatest constraints in financing that growth, the organization explained.

Trade has become more sensitive to financial factors , such as fluctuations in interest rates or changes in investor confidence, which affects developing countries, as monetary volatility can make imports and debt repayment more expensive .

“Prices increasingly reflect speculative strategies, not supply and demand. When finance sets food prices, countries have more difficulty ensuring affordable and reliable supplies,” the organization stated.

The unusual situation of a weakening dollar while US Treasury bond yields rise could indicate lower short-term demand for US assets; however, the dollar’s dominance persists , as almost 90% of global foreign exchange trading (the buying and selling of currencies needed for global payments) involves the dollar.

“The dollar’s ​​influence goes far beyond central bank reserves or trade pricing. It affects who can access credit, where investment flows, and how quickly financial crises spread around the world,” the report explained.

UNCTAD highlighted that developing countries now account for more than 40% of global merchandise production and trade , and almost 60% of global Foreign Direct Investment (FDI) inflows , up from 22% in the mid-2000s.

“However, their participation in global financial markets remains low, at 25%, and has even decreased, a mismatch that limits their development. Excluding China, developing countries control only 12% of the value of the global stock market and 6% of the global bond market,” he noted.

The report warned that domestic financial markets have not kept pace, leaving many developing countries dependent on foreign banks and markets, “often with high and volatile interest rates.”

Given this scenario, the report stressed the need to build economies that can withstand shocks , adapt to transitions, and grow sustainably even under conditions of uncertainty.

In that regard, the analysis suggested reforming the global financial system to support climate-vulnerable countries; expanding regional financial cooperation; strengthening national financial ecosystems; addressing emerging financial risks beyond the banking sector; and promoting “networked multilateralism,” UNCTAD concluded.

According to the United Nations report , the projected global economic slowdown by 2025 would be driven by increasing volatility in financial markets and geopolitical uncertainty , factors that are putting pressure on trade and investment worldwide.

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According to an analysis, the international organization noted that advanced economies also recorded historic lows in FDI capture, registering $336 billion in 2023, the lowest figure since 1996.

As a percentage of their Gross Domestic Product (GDP), FDI inflows to developing economies in that year were only 2.3%, roughly half the level reached in 2008.

“It is no coincidence that FDI is reaching new lows at the same time that public debt is reaching historic highs. Private investment will now need to drive economic growth, and FDI is one of the most productive forms of private investment. However, in recent years, governments have been erecting barriers to investment and trade when they should be deliberately removing them. They will have to break this bad habit,” said Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group.

The World Bank report also highlighted that investment treaties increase FDI flows between signatory countries by more than 40 percent. However, between 2010 and 2024, only 380 new investment treaties entered into force , barely a third of the number recorded in the 1990s.

In 2023, FDI accounted for approximately half of the external financing flows received by developing economies, he noted.

Under favorable conditions, the report noted, a 10% increase in investment inflows can generate a 0.3% increase in real GDP after three years, and in countries with stronger institutions, better human capital, greater trade openness, and lower informality, this impact can be almost three times greater.

The analysis found that investment is concentrated in larger economies. Between 2012 and 2023, approximately two-thirds of FDI flows to developing economies went to just 10 countries : China received almost a third of the total, while Brazil received 10% and India 6%. Meanwhile, the 26 poorest nations received barely 2% of the total. Half of the flows came from the United States and the European Union.

Efforts to improve FDI

The World Bank identified three strategic priorities to reverse the trend and strengthen investment in developing economies.

The first is to redouble efforts to attract FDI , which is why he recommended relaxing the restrictions on FDI that have accumulated over the last decade, in addition to accelerating the investment climate.

The second is to expand the economic benefits of FDI . Promoting trade integration, improving the quality of institutions, fostering human capital development, and increasing the participation of more people in the formal economy are some of the measures that would help attract more FDI, according to the institution.

The third seeks to promote global cooperation , where all countries must collaborate to foster policy initiatives that help direct FDI flows toward developing economies with the greatest investment deficit.

Against this backdrop, representatives from governments, international institutions, and the private sector will meet in Seville, Spain, from June 30 to July 3, at the 4th International Conference on Financing for Development, to discuss how to mobilize the financing needed to achieve key development goals.

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