Impact of Tariff Increases on Industries in Development Countries

This study analyses the global development impacts of unilateral tariff escalations by a large advanced economy, focusing on how tariff shocks propagate through demand, substitution, retaliation, and especially global value chains. Using policy simulations, it finds that unilateral tariffs generate negative global income effects and heightened policy uncertainty, while also shifting relative prices and export demand across countries and sectors. Due to production-network linkages and sectoral specialisation, even countries with limited direct tariff exposure can suffer large losses when they supply key inputs to heavily affected industries. The evidence highlights resilience channels for developing countries, export diversification and the strengthening of regional value chains and South–South trade, alongside the need for industrial upgrading and targeted social protection. For advanced countries, the results stress that beggar-thy-neighbor tariff policies create sizable spillovers and call for multilateral, rules-based restraint and international financial safety nets.