New Delhi [India], April 5 : The maximum increase in tariffs announced by US President Donald Trump is targeted at emerging economies, particularly those in Asia, according to a report by Systematix Research.
The report stated that 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.
It said, "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 outlined 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 EMs 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.
The report also warned that every 100 basis point (bps) decline in global trade opennessmeasured as the sum of imports and exports relative to GDPcan 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 targetedwho together contribute 66 per cent of US importshas been pegged at 34.6 per cent. In comparison, the remaining 170 countries, which contribute just 0.2 per cent to US imports on average, face a minimum tariff of 10 per cent.
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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