Tariff uncertainty could curb investment in small businesses, UN trade agency says

GENEVA: Small and medium-sized businesses and developing economies are likely to be at particular risk of a slowdown in investment due to ongoing tariff uncertainty, the Secretary-General of the UN Trade and Development Agency told Reuters on Monday.

AI Brief

UNCTAD warns global investment may fall further in 2025 due to rising trade tensions and tariff threats.
Small countries and businesses are most vulnerable, facing higher tariffs and limited access to AI-driven growth.
The US is urged to spare least developed nations from harsh tariffs as talks with China continue amid uncertainty.

"We fear that there will be more lagging numbers in terms of investment," UNCTAD's Rebeca Grynspan said in an interview at her office in Geneva.

"We fear small and medium-sized businesses will be affected everywhere, but also small countries that depend much more on trade and investment to really seek growth."

While AI has driven trade and investment this year, she said, it remains concentrated and excludes small countries with developing economies.

A UNCTAD report in July found that global foreign direct investment fell for a second consecutive year in 2024, with concerns this year could be even worse as trade tensions rock investor confidence.

Since he took office in January, U.S. President Donald Trump's tariff decisions have shaken financial markets and sent a wave of uncertainty through the global economy.

Grynspan said forecasts for 2026 hinge on whether the current trade tensions escalate into a full-blown trade war, or if higher tariffs persist amid ongoing trade negotiations.

"There is uncertainty, but there will be more predictability. The markets will adapt to the new situation," she said.

Grynspan said the least developed countries in Africa and small island states were "worse off" and have less resilience amid trade uncertainties, as they face higher tariffs compared to developed nations.

While the EU has struck a deal setting duties at 15% on most goods it exports to the United States, they are often much higher on so-called least developing countries. Laos, for example, faces tariffs at 40%.

Grynspan urged the U.S. to spare vulnerable countries from higher tariffs. In July, Lesotho, a small African nation, received a modified tariff rate of 15% following Trump’s earlier threat of 50% tariffs.