Who Bears the Burden? Tracking the Global Impact of Recent US Foreign Policy Shifts

Since January, the United States has adopted a range of foreign economic policies with negative impacts on the rest of the world, including higher tariffs on exports, taxes on remittances, and reductions in US foreign assistance. CGD experts have discussed each of these areas in depth.

In this blog we draw on that analysis to construct a ranking assessing the combined impact of these changes: which countries are likely to suffer most from the US’s new trade, remittances, and aid policies, and which are comparatively unaffected. Note that the analysis is based on announced policies and implementation (let alone impact) is still in considerable flux.

The ranking

Our consolidated ranking of exposure is based on three dimensions:

1. Tariff exposure: the effective added tariffs to a given country and its trade exposure to the US, drawing from Liliana Rojas-Suarez and Ignacio Albe’s Effective Tariff Tracker.
2. Remittance losses: the potential impact of taxing remittances sent from the US as a share of national income, drawing from Helen Dempster, Charley Ward, and Sam Huckstep’s work on the impact of the new remittances tax.
3. Aid cuts: the size of recent cuts in US development assistance as a share of national income (GNI), drawing from Justin Sandefur and Charles Kenny’s estimates.

Each of these dimensions was ranked separately. We then calculated the simple average of these rankings and converted it to a 0–1 scale, where 0 represents the least affected and 1 the most affected. (This implicitly applies an equal weighting to each measure). The map below shows how countries are distributed across the 0–1 exposure scale. Darker colors indicate higher levels of impact.

Figure 1. Map of impacts of US foreign economic policy measures

Table 1 provides a detailed list of the top 20 most affected countries and their rank in each of the dimensions. The consolidated scale suggests the five most affected countries are Haiti, Honduras, El Salvador, Guatemala, and Jordan. These are all countries with strong links to the US through trade, remittances, or aid flows. At the other end of the spectrum, countries such as Oman, Angola, Saudi Arabia, Kazakhstan, and Brunei are amongst the least affected according to our measure. These nations are comparatively wealthy oil and gas exporters.

Table 1. Top 20 most affected countries by the US foreign economic policy measures. Click on the arrow to see the full list.

Takeaways: Who bears the burden?

The country examples illustrate three patterns that stand out in the ranking:

• Poorer countries have been disproportionately hurt
• US allies have not been spared
• Gas and oil exporters have been insulated

Low- and middle-income countries make up 96 percent of the 50 most affected countries, but just 49 percent of the 50 least affected. Figure 2 shows a negative and statistically significant correlation between the impact of the three policies (with a higher number indicating higher impact) and national income levels. A recent ODI Global study similarly underscores that low-income countries as well as fragile and small island states have seen some of the greatest impact of US economic policymaking this year.

This is a result, in part, of aid being directed disproportionately at poorer countries. Yet, even stripping the aid component from our ranking, low- and middle-income countries are still disproportionately affected: they are 79 percent of the most affected nations by trade and remittance policies, while they make up only 62 percent of the countries in our dataset.

Figure 2. Richer countries are less impacted

Another finding is that longtime US allies suffer similarly to non-allies. Japan is just one spot below China in the rankings (81st and 80th). Jordan is ranked fifth overall, while Israel ranks in the top 50 most affected by both tariff and remittance policies. Similarly, long-standing US allies like Liberia fall within the top 20 most affected nations.

We use the Gallup Rating World Leaders report to see if recent policy changes have disproportionately impacted countries with (previously) positive or negative views of US leadership. The short answer: there is no relationship; friendly nations and America skeptics appear to have suffered (or not) at broadly similar rates.

Figure 3. Positive views of American leadership and combined impact

Finally, a large oil and gas industry shields countries from the effects of the new US foreign policy. Ten out of the bottom 20 countries in terms of impact ranking are oil exporters, and six of them are OPEC members. This relative insulation stems from three factors: first, energy exports are largely exempt from the tariff increases; second, these countries tend to have smaller diaspora populations in the United States, limiting their exposure to remittance taxation; third, many tend to have limited dependence on foreign assistance.

For many low- and middle-income countries, development progress has already stalled under the weight of debt distress, climate shocks, and sluggish global growth. The added burden of these US policy shifts risks pushing these economies, many loyal allies of the United States, even further backwards.