Impact of Global Trade Dynamics on SMEs and Developing Economies

As global trade dynamics continue to shift, the impact on small and medium enterprises (SMEs) and emerging economies has come into sharp focus. Recent comments from Rebeca Grynspan, the Secretary-General of the UN Conference on Trade and Development (UNCTAD), highlight concerns over how ongoing tariff uncertainties could hinder investment in these vulnerable sectors. In a discussion about the current state of global investment, Grynspan noted, “We fear that there will be more lagging numbers in terms of investment.” This lack of investment is particularly troubling for SMEs across the globe and for developing nations heavily reliant on trade for economic growth. “We fear small and medium-sized businesses will be affected everywhere,” she emphasized, pointing to the unique challenges faced by smaller economies that depend on foreign direct investment. Despite advancements in trade driven by artificial intelligence this year, Grynspan observed that the benefits have not reached many developing countries, which continue to be excluded from the growth opportunity. A UNCTAD report released earlier indicated a decline in global foreign direct investment for the second consecutive year in 2024, raising fears of further drops this year amidst ongoing trade tensions. The shifting political landscape, particularly under the Trump administration, has contributed to market volatility. Since January, decisions regarding tariffs have generated widespread uncertainty, complicating the investment climate. Looking ahead, Grynspan pointed out that predictions for 2026 depend heavily on whether the current trade hostilities worsen into a full-scale trade war or if established tariffs remain in place as negotiations continue. “There is uncertainty, but there will be more predictability. The markets will adapt to the new situation,” she stated. Developing countries, particularly in Africa and small island nations, have been shown to experience harsher repercussions from these trade realities, as they often face higher tariffs than their developed counterparts. For example, while the European Union has negotiated a deal that sets duties at 15% on most goods exported to the U.S., tariffs for the least developed countries remain significantly steeper, with Laos encountering rates as high as 40%. Grynspan has called on the U.S. to reconsider its approach to tariffs on vulnerable nations. For instance, in July, Lesotho received a revised tariff rate of 15% after facing threats of 50%. These adjustments reflect a critical need for policies that protect the most affected economies during turbulent economic times.