Tariffs tend to hit the poor harder, WTO says

Import tariffs tend to disproportionately hit low-income households, the World Trade Organization said in a report on Monday, countering what it sees as backlash against open markets and rising protectionism.

WTO Director-General Ngozi Okonjo-Iweala said the 2024 World Trade Report reaffirmed trade's role in reducing poverty and sharing prosperity "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 said.

The United States is poised to hike tariffs on a range of Chinese imports, including a quadrupling of the rate for electric vehicles, while Canada has matched the U.S. EV rate and the European Union had introduced its own EV duties.

China has responded with investigations into EU dairy, pork and brandy imports and canola from Canada.

U.S. presidential candidate Donald Trump has proposed a 10% tariff on all imports and a higher rate for those from China.

The WTO report said 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, benefiting poorer households.

Richer households consume a greater share of imports from high-income economies, the WTO report said.

Protectionist policies may fail, the report said, because they often lead to higher domestic prices that reduce consumption. 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.