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The end of global free trade and aid a toxic reality for poor nations

Natale Labia
By Natale Labia
8 Apr 2025
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As global markets go into free fall, officially now in bear market territory, the economic consequences of this economic warfare are becoming clear. What is less clear at this early stage are what the social, humanitarian and political effects will be.

There can be no sugar-coating the bitter reality. Donald Trump’s decision on Wednesday, 2 April, to enact sweeping “reciprocal” tariffs on US trade partners will go down as one of the greatest acts of self-harm in global economic history. Such an imposition of trade barriers will wreak havoc on households, businesses and financial markets across the world, toppling a global economic order that America profited from and helped to create.

But while the US and other rich nations will be hit hard, in a sick twist of fate Trump has decided to attack the poorest countries which depend most on trade. “Free trade, not aid” was the mantra that was meant to pull the developing world out of its economic morass. What then if those impoverished nations of the Global South must deal with neither? Such is the situation in which the poorest countries on earth find themselves in.

The primary target of this economic warfare is clearly China. But that enabled Trump and his advisers, led by trade policy chief Peter Navarro, to also ensure that any country which had been used as a conduit for Chinese goods into the US was hit by giddying tariffs.

Cambodia was slapped with Asia’s highest tariff rate of 49%. Garment manufacturing giant Bangladesh was hit with a 47% rate, while Myanmar, where a devastating earthquake left more than 3,000 dead last week, was slapped with a 45% duty.

South Africa’s neighbour, Lesotho, almost entirely dependent on diamond and garment exports, received a 50% tariff, the highest of any African country.

“Oh, look at Cambodia,” Trump said at the White House last week, drawing laughter from the sycophantic crowd. “They made a fortune with the United States of America.” The average Cambodian earns about $6.65 (R130) a day, according to World Bank data, less than a fifth of the global average.

As global markets go into free fall, officially now in bear market territory, the economic consequences of this lunacy are becoming clear. What is less clear at this early stage are what the social, humanitarian and political effects will be.

While the US cuts trade, the world cuts aid


This is rapidly turning into an absolute worst-case scenario for those countries who depend on free trade – or, at the minimum, least developed country status and access to the world’s largest markets – and aid. Even before this astonishing assault on free trade, development policy in the West was going through a grim counter-revolution.

Not only has the US shut down USAID and the UK slashed development aid, but there have also been cuts to the French, Belgian and Dutch budgets. Even Germany has put its aid budget on the chopping block. In a worst-case scenario, global aid budgets could be slashed by a staggering $74-billion (R1.4-trillion) in 2025 alone. That would be 30% or so of total overseas development assistance, or ODA, at a time when the poorest countries are labouring under excessive debts and humanitarian crises.

The neoliberal Washington Consensus, which prioritised free trade and aid to those who needed it most, was far from perfect. However, by allowing such countries access to global markets and providing necessary humanitarian relief, it led to the greatest upliftment of people from poverty in history. Yes, this mostly happened in Asia, but as factories have opened in Ethiopia, Kenya, Lesotho and elsewhere across the continent, Africa has benefited too.

The world needs to come together without the US


The question will be how these countries react. Ideally, all countries that have been targeted by the US should immediately work together to create a low-tariff zone without the US to ensure that exporters can find at least some demand, even if the US consumer will be largely impossible to replace. But this is easier said than done. History has shown that when one player, especially the largest player, erects tariffs, it results in not only all other countries reciprocating by placing tariffs on imports from that country, but a rush to the bottom where countries turn inwards and impose tariffs on all other countries. For example, the EU has already warned that it refuses to be a market for those goods that were destined for the US and could now be “dumped” on its market.

All eyes will now be on the largest players, specifically the EU, China and India. South Africa too will play an important role over the next few months, the current governance vacuum notwithstanding. Will these countries stand up and take ownership of the current globalised and interconnected world which has benefited us all, despite what the MAGA zealots might want us to believe? Or will they retreat and round the wagons?

The past few months and years have already seen the tearing up of the political rule- and law-based global order. In the past week, we have seen the global economic framework equally shredded. Countries must now choose whether to act more like the US, and turn inwards, or to act in defiance of the former hegemon, ironically the very country that built this economic and political global order. Humanity’s prosperity depends on the answer. DM

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