WTO Reports Tariffs Impact Poorer Communities More Severely, According to Reuters

BRUSSELS – A report released by the World Trade Organization highlights that import tariffs tend to have a disproportionate impact on low-income households, challenging the rising trend of protectionism and the backlash against open markets.

WTO Director-General Ngozi Okonjo-Iweala emphasized that the 2024 World Trade Report reaffirms the importance of trade in reducing poverty and fostering prosperity, contradicting the growing belief that trade exacerbates inequality.

The report notes that restrictive trade policies often adversely affect low-income households, women, and smaller businesses that struggle with the increased fixed costs associated with trade.

Recently, the United States is set to raise tariffs on various Chinese imports, including a significant increase in rates for electric vehicles. Canada has mirrored this move, while the European Union has introduced its own electric vehicle tariffs.

In response, China has launched investigations into imports of dairy, pork, brandy from the EU, and canola from Canada.

U.S. presidential candidate Donald Trump has suggested implementing a 10% tariff on all imports, along with a higher rate for those from China.

The WTO report states that low-income households typically carry a heavier burden from higher tariffs. In the United States, consumer goods from China that currently do not face import tariffs are mainly sent to low-income regions, benefiting disadvantaged households.

The report further indicates that wealthier households tend to consume a larger proportion of imports from high-income countries.

According to the analysis, protectionist policies may not be effective, as they often lead to increased domestic prices that can reduce consumption and provoke retaliatory measures from trading partners.

Additionally, the report highlights that removing tariffs can be politically challenging, even when they are no longer necessary for protecting specific sectors, resulting in sustained higher prices.

The conclusion drawn in the report is that protectionism does not serve as a viable route to inclusivity. Instead, it represents a costly method of safeguarding particular jobs, which can escalate expenses for other sectors and invite retaliation from dissatisfied partners.