How Tariffs Are Shaping Trade Laws in the Developing World: Legal Fault Lines in a Shifting Global Economy

January 2, 2026
9:12 am

How Tariffs Are Shaping Trade Laws in the Developing
World: Legal Fault Lines in a Shifting Global Economy

Lextalk

As global trade hits record highs despite repeatedly growing uncertainties, tariffs have re-emerged as one of the most powerful legal and economic tools shaping international commerce, especially for developing countries.

Tariffs as Legal Instruments, Not Just Economic Tools

Tariffs are often discussed in economic terms—prices, costs, and competitiveness. But at their core, they are legal instruments embedded in international trade law.

Under the World Trade Organisation (WTO)’s framework, countries are permitted to impose tariffs within bound rates agreed under the Most-Favoured-Nation (MFN) commitments or through preferential trade agreements. While nearly two-thirds of global trade now occurs tariff-free, the remaining share faces high and uneven duties, creating legal asymmetries that disproportionately affect developing economies.

“The UNCTAD Global Trade Update of March 2025 highlights that tariffs remain particularly elevated in agriculture, textiles, and apparel sectors—where developing countries traditionally hold comparative advantages.”

From a legal standpoint, this raises questions about equitable market access, one of the foundational principles of the multilateral trading system.

How Tariff Escalation Creates a Legal Trap for Industrialisation

One of the most legally consequential practices affecting developing nations is tariff escalation—the imposition of higher duties on finished goods than on raw materials or intermediate inputs.

While lawful under current WTO rules, this structure creates systemic disadvantages:

Countries exporting raw cotton, minerals, or agricultural produce face relatively low tariffs
Once they attempt to export value-added products like textiles, processed foods, or manufactured goods, they encounter steep legal barriers

This undermines the right of developing economies to industrialise and move up global value chains. In legal terms, tariff escalation operates as a de facto industrial policy for developed countries, while constraining the policy space of developing states—despite formal commitments to “special and differential treatment” under WTO law.

South–South Trade: High Tariffs, Weak Legal Integration

Another critical legal blind spot lies in South–South trade, where tariff rates remain strikingly high.

Trade between regions such as Latin America and South Asia faces average tariffs of around 15%, reflecting weak trade agreements and limited legal harmonisation. Unlike North–South trade, which often benefits from preferential regimes, South–South trade lacks robust institutional frameworks to lower duties and resolve disputes efficiently.

This legal fragmentation:

Restricts the diversification of export markets for developing countries
Increases vulnerability to unilateral tariff shocks from major economies

Macroeconomic Consequences and Legal Uncertainty

UNCTAD projections warn that if current tariff regimes persist, global GDP could decline by more than 2 percentage points over the medium term.

For developing economies, the legal uncertainty created by fluctuating tariff policies—especially from major trading powers—discourages investment, weakens confidence in trade institutions, and disrupts long-term development planning.

While countries imposing high tariffs may experience short-term trade balance improvements, legal and economic evidence shows these gains are temporary. Retaliatory measures, dispute settlement cases, and erosion of trust in multilateral rules ultimately result in net welfare losses.

The Legal Balancing Act Ahead

Tariffs remain a legitimate policy tool under international law, but their misuse risks undermining the very trade system designed to foster development and stability.

For developing countries, the challenge is not merely economic—it is also legal and structural. Essential steps toward a fairer global trading order include:

Strengthening South–South trade agreements
Reforming tariff escalation practices
Revitalising multilateral trade rules

In an era of rising protectionism, the real legal question is no longer whether tariffs are allowed, but whether the current tariff architecture is compatible with inclusive global growth.

Aligning the concepts of Performance and Culture Together

As legal services face unprecedented pressure from clients, competition, and technology, performance matters more than ever. But performance divorced from culture is fragile. Firms that combine high expectations with high trust will not only perform better but also endure. Tougher partner expectations, when grounded in purpose and supported by trust, do not weaken firms.

Sources Referred-

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