WASHINGTON — Rising trade tensions are threatening to block a path out of poverty for the world’s poorest countries: their ability to manufacture low-cost parts for multinational corporations.
In a report out Tuesday, the World Bank warns that trade conflicts between major countries — specifically the United States and China — are disrupting supply chains and causing manufacturers to delay investment decisions to avoid getting caught in a trade-war crossfire.
For years, poor countries have been able to “export their way out of poverty” by feeding multinational companies with components, said World Bank economist Aaditya Mattoo, who co-directed the study.
But rising protectionism “could stymie” that progress. In a worst-case scenario, the bank says, more than 30 million people around the world could be pushed into poverty (incomes below $5.50 a day) around the world if the trade conflict worsens.
President Donald Trump has reversed decades of U.S. support for ever-freer trade. In a drive to reduce America’s vast trade deficits, he has slapped tariffs on foreign steel and other products and pursued a trade war with China over U.S. allegations that the Chinese steal technology and pressure foreign companies to hand over trade secrets.
But the damage in trade conflicts isn’t limited to the combatants, Mattoo notes. For example, Mongolia sells metals to Chinese factories; so what hurts China, hurts Mongolia too.