SDG 9: Industry, Innovation and Infrastructure | SDG 10: Reduced Inequalities | SDG 17: Partnerships for the Goals
Ministry of Commerce and Industry | Directorate General of Foreign Trade (DGFT)
The UNCTAD Policy Insight, Who wins when trade policies shift? notes that recent adjustments in United States trade policy have significantly altered global competitive dynamics.
Since 2024, U.S. tariffs have increased by nearly 15 percentage points, moving away from uniform WTO Most Favored Nation (MFN) rules toward a highly differentiated structure where only 20% of imports now enter under duty-free or MFN rates. These uneven tariff hikes incentivize U.S. importers to shift sourcing toward developed economies, which generally benefit from improved relative competitiveness. Conversely, many developing economies and Least Developed Countries (LDCs) face higher tariff barriers, although some may find niche opportunities in agriculture and low-tech manufacturing through preferential programs like the African Growth and Opportunity Act (AGOA). However, persistent tariff escalation continues to limit the ability of raw-material exporters to move into higher-value segments of global value chains.
Key Pillars of the Evolving Global Trade Landscape
Differentiated Tariff Structures: A shift from uniform MFN rules to a sector-and-country-specific tariff regime that now governs 80% of U.S. imports.
Sectoral Dispersion: Highly uneven impacts across industries, with chemicals showing high tariff dispersion while sectors like iron and steel face uniform increases.
Trade Sourcing Diversion: Incentivizing importers to re-align supply chains toward suppliers facing lower relative tariffs, primarily favoring developed nations.
Preferential Access Windows: Utilizing schemes like the AGOA to maintain competitiveness in specific low-tech and agricultural sectors.
Value-Chain Barriers: The continued presence of tariff escalation that penalizes value addition, preventing exporters from upgrading from raw materials to finished products.
What is “Tariff Escalation”? Tariff escalation is a trade policy structure where the tariff rates applied to imported goods increase as the level of processing increases. For example, a raw commodity like cocoa beans may enter a market with zero duty, but processed products like chocolate face significantly higher tariffs. This mechanism protects domestic industries in the importing country but effectively traps exporters in developing nations within low-value raw material production, as the higher tariffs on finished goods make it economically unviable for them to upgrade their industrial capacity and capture more value from the global supply chain.
Policy Relevance
The UNCTAD analysis represents a transition from stable multilateral trade to “Differentiated Competitiveness”, requiring the Ministry of Commerce to proactively manage India’s export resilience as U.S. tariffs shift global sourcing patterns.
Addressing Rice Export Disadvantage: The Directorate General of Foreign Trade (DGFT) must monitor the 15% tariff-driven realignment where Indian rice is losing market share to cheaper imports from competitors like Italy.
Mitigating Sectoral Risks: Proactive support is needed for the machinery, plastics, and oilseeds sectors, which the report identifies as high-risk areas where Indian exporters face reduced competitiveness under the new U.S. structure.
Capturing Diversification Windows: India can utilize the report’s findings to identify specific niches—such as low-tech manufacturing—where uneven tariff hikes on competitors create an opening for Indian exporters to gain market share.
Strategizing Trade Diplomacy: The findings emphasize the need to leverage preferential trade agreements to insulate India’s broader export portfolio from the “developing economy” disadvantage noted in the global data.
Follow the full report here: UNCTAD: Global Trade Update (February 2026): Who wins when trade policies shift?