World Bank President Ajay Banga on Wednesday said a broad-based liberalisation among emerging markets could offset risks of “reciprocal” tariffs that they could face.
Speaking to reporters ahead of next week's World Bank and IMF Spring Meetings in Washington, Mr Banga said higher tariffs placed by developing markets create a “real risk of reciprocal tariffs and, most importantly, lost competitiveness”.
Mr Banga's remarks come as US President Donald Trump's tariff regime has upended the norms of global trade that have been observed for decades. Before his tariff reversal last week, many of Mr Trump's harshest reciprocal tariffs were imposed on developing countries such as Vietnam (46 per cent), Cambodia (49 per cent) and Lesotho (50 per cent).
Low-income countries typically have a higher tariff rate than advanced economies to protect their domestic industries and generate government revenue.
Mr Banga also said he saw untapped potential in deeper regional integration among emerging market economies.
“Strengthening regional ties through more efficient border processes, lower trade costs, less friction, clear rules of origin – these can boost trade volumes and support more stable and diversified growth,” he said. “These aren't abstract principles, they're practical strategies, and they could be done with these countries.”
Mr Trump's trade policies have wrought a heightened degree of uncertainty for the global economic outlook and dampened investment sentiment.
“That's the part I don't know how to predict, how long it takes to get out because most of this is caused by the current discussion on trade,” Mr Banga said, noting he is encouraging dialogue.
A separate report from the World Trade Organisation released earlier on Wednesday showed tariffs and uncertainty pose “severe downside risks” to global trade. The WTO currently predicts global goods trade to fall by 0.2 per cent this year after previously forecasting it to grow by 2.7 per cent.
Next week's gatherings in Washington also come as the Trump administration targets multilateral institutions such as the World Bank and the International Monetary Fund. Since his second term began, Mr Trump has withdrawn the US from the Paris Climate Accord and World Health Organisation, and ceased US participation with several UN agencies.
Mr Banga said he does not know how much the US – as well as some European countries – will contribute to the International Development Association, which supplements the World Bank's main lending arm.
The US is the largest shareholder of the World Bank, holding 17.25 per cent of the Washington-based multilateral's shares. Mr Banga said the World Bank has had active discussions with the new US administration.
“I don't know where it'll end, but I've got no problem with the dialogue I'm having. They're asking the right questions, and we're trying to give them the right answers,” he said.
