Uncertainties in global trade policy driven by the tariff policy of the United States (US) are forcing developing economies to absorb costlier cross-border trade, rattling financial markets and denting investor confidence, according to the United Nations Conference on Trade and Development (UNCTAD).

In a report, UNCTAD noted that trade policy uncertainty has risen to “unprecedented levels” this year, acknowledging that rule-based trading systems, which were intended to mitigate these shifts, have been weakened.

UNCTAD, a UN body tasked to support developing countries to access the benefits of global trade, stated that the US’ reciprocal tariff policy is the biggest driver of this unpredictability.

Even when US President Donald Trump was still mulling these new tariffs, UNCTAD noted that import volatility was already at its worst, driving volatility across the global market.

For the Philippines’ sake, its imports to the US were first slapped with a 17 percent tariff rate, which was later adjusted upward to 20 percent and then settled at 19 percent.

These changing rates left the government, and especially domestic exporters, uncertain about the best policies to maintain competitiveness and minimize potential losses.

Nearing one month into the official implementation of the new taxes—after months of threats and speculations—UNCTAD noted that “uncertainty itself can be more destabilizing than tariffs.”

“Unpredictable trade policies significantly increase the cost and complexity of cross-border commerce. Companies are forced to carry excess inventory, hedge against losses, and constantly reconfigure their supply chains—all of which reduce efficiency and raise operational costs,” the report read.

UNCTAD said the impact of these variabilities are primarily felt by developing and least-developed economies, particularly small firms based in these countries, since they typically operate with limited working capital and less efficient shipping infrastructure.

For instance, restricted access to the US market could mean less exposure to potential investors who could've built the productive capacity needed for growth.

Before the new tariffs were expected to be implemented, large importers shifted to front-loading tactics to bring their goods to America before higher taxes take effect—an option not available for small firms.

“The effect was most pronounced for developed countries, suggesting that importers there were better able to anticipate and act ahead of tariff deadlines. In contrast, developing countries showed a more muted frontloading response, while least developed countries exhibited little to no such pattern,” the report found.

While unpredictability in policies is immediately apparent in trade, UNCTAD pointed out that it inevitably spills over into financial markets.

The UN body warned that these shifts can unsettle exchange rates, disrupt capital flows, and tighten credit conditions.

For developing economies, the biggest threat would be a weakened investor confidence and restricted access to trade financing, feeding into inflationary pressures that deepen fiscal fragility.

While its outlook was largely bleak, UNCTAD noted that diversified export markets and participation in trade agreements position countries to cushion revenue losses and production setbacks.

“Companies operating under regional or bilateral frameworks tend to face fewer disruptions and enjoy greater confidence to make long-term investments, even amid global policy volatility,” it shared.

The UNCTAD report cited advance notice of policy changes, policies based on data-driven reasoning, and promoting international coordination as among the “practical steps” to help restore stability in global trade.

It likewise mentioned the need for countries to explore new markets and advance effective dispute settlement efforts to reduce the risks of trade uncertainties.

“Above all, restoring stability and predictability is essential – for businesses to invest, for countries to grow and for trade to fulfil its role as a driver of development,” stressed UNCTAD.