The World Trade Organization (WTO) is countering what it sees as a backlash against open markets and rising protectionism, highlighting that tariffs tend to hit the poor much harder.

Pointing out that import tariffs tend to disproportionately hit low-income households, WTO Director-General Ngozi Okonjo-Iweala referenced the organisation’s recently released 2024 World Trade Report, reaffirming trade’s role in reducing poverty and sharing prosperity. This, according to her, is “contrary to the currently fashionable notion” that trade was creating a more unequal world. 

Globally, restrictive trade policies often have a disproportionate impact on low-income households, women and on smaller companies that may struggle with increased fixed costs of trade, the WTO report cited. The United States is poised to hike tariffs on a range of Chinese imports, including a quadrupling of the rate for electric vehicles (EVs), while Canada has matched the US EV rate, and the European Union (EU) has introduced its own EV duties. 

China hits back 

China has responded with investigations into EU dairy, pork and brandy imports and canola from Canada. US presidential candidate Donald Trump has proposed a 10 per cent tariff on all imports and a higher rate for those from China. 

The WTO report highlighted that on the whole, low-income households typically faced a greater burden from higher tariffs. In the United States, consumer goods from China that are now exempt from import tariffs are predominantly shipped to low-income regions, benefitting poorer households. 

Richer households consume a greater share of imports from high-income economies, the WTO report stated. However, the report contended that protectionist policies may fail because they often lead to higher domestic prices that reduce consumption. 

In addition, they may also lead to damaging retaliation by trading partners. Tariffs then prove politically hard to remove even when no protection for a sector is needed, locking in higher prices. 

The WTO report concludes that protectionism is not an effective path to inclusiveness, but an expensive way to protect specific jobs that can raise costs for other sectors and risk retaliation from disgruntled partners.