Trump’s Tariffs Will Hurt The World’s Poor The Most – OpEd

Most US media coverage of President Donald Trump’s trade war has focused on how his global tariff regime is likely to impact the US economy and American consumers.

However, it’s the workers in Bangladesh, Cambodia, Ecuador, Guatemala, Lesotho, Vietnam and other poor countries who are likely to be harmed the most by the trade war if it continues after the current pause.

Most economists, regardless of their political affiliation, believe that international trade improves the overall well-being of people in nations that trade with each other.

I am one of more than 1,800 economists who recently signed a letter emphasizing that freedom to trade is associated with higher incomes, faster rates of economic growth and greater economic efficiency—and that tariffs will harm US businesses that use imports in their production.

The US trade deficit isn’t a sign of unfair trade practices—though many such practices undeniably exist—it indicates, instead, that the United States is a good place to invest.

America’s focus on domestic US interests is an understandable response to Trump’s nonsensical claims that his tariffs will usher in a new “golden age” of American greatness. But focusing on the United States ignores the fact that the tariffs can be a matter of life and death for many people in countries with which we trade.

The post-Cold War era of globalized trade and economic growth has witnessed the largest reduction in extreme poverty in the shortest period in human history.  The percentage of the global population living in extreme poverty, according to World Bank data, has fallen from nearly 31% in 1990 to 8% today. Tariffs could destroy many of the jobs that have allowed these people to improve and extend their lives.

Vietnam, which is slated to have a 46% tariff placed on its goods at the expiration of the current 90-day pause, is a good case in point. Nike produces half of its shoes in Vietnam, and its 162 supplier factories employ nearly half a million workers. Similarly, Apple’s Vietnamese suppliers employ almost 200,000 workers in their factories.

Jobs such as these contributed to Vietnam’s extreme poverty rate falling from 30% in 2000 to about 2.5% before the onset of the Covid-19 pandemic. Even jobs in Vietnamese apparel factories that have been singled out for protest as so-called “sweatshops” pay an average wage of nearly US$10 a day—more than four times higher than the $2.15 per day the United Nations and World Bank use to demarcate extreme poverty around the world.

Profit margins for these suppliers are not typically more than 5%. A 46% tariff would destroy jobs in these factories and risk returning the workers to much lower wages in the “informal” sector of their economy, where more than 20% of Vietnam’s population still subsists on less than $6.85 per day.

The trade war would be even more disastrous for Bangladesh, which is facing a 37% tariff.  Its garment industry employs four million workers and comprises 13% of the country’s entire economy and 80% of its exports.

The growth of Bangladesh’s apparel industry has played a major role in reducing its extreme poverty rate by two-thirds: from more than 30% in 2000 to a little over 10% before the pandemic.

Bangladesh’s population in 2000 was just shy of 135 million. That means some 40 million people were living in extreme poverty at the time. In 2020, with a population that had grown to 166 million, just 17 million were living in such conditions.

Like Vietnam, even working in an apparel factory that’s been singled out as a sweatshop helps workers escape extreme poverty. Protested sweatshops in Bangladesh pay an average of nearly $6 per day. Tariffs that destroy such apparel industry jobs would make the workers’ economic and personal conditions measurably worse.

International trade is truly a win-win.  It provides American consumers with a greater variety of goods at cheaper prices and boosts our standard of living.

But the workers in other countries who get jobs that help them escape extreme poverty might be even bigger winners. And they stand to lose the most if President Trump’s global trade war continues.

• This article was also published in Asia Times