You could almost hear the collective exhale across the globe when the Trump administration announced that all countries except China would get a 90-day reprieve from tariffs, except for the baseline ten percent which remains in effect for everyone. While messaging has been muddled, a sense of injustice around bilateral trade deficits was evidently a key instigating factor behind the initial tariff scheme and a return of goods labeled “made in America,” a key goal. But as we argue below, the current strategy is not going to deliver on that goal and a deficit-driven trade agenda could result in lasting harm to the world’s poorest countries while providing no discernible benefit to the US.
A much more practical and effective approach would be to prioritize negotiations based on the latest analysis by the United States Trade Representative (USTR), which documents the most significant tariff and non-tariff barriers affecting US exports of goods and services. USTR’s analysis covers a broad set of concerns that go well beyond tariffs and quotas, including intellectual property theft, burdensome or discriminatory procurement practices, foreign exchange restrictions, licensing requirements, subsidies, bribery, and corruption. This gives the administration a ready-made, fact-based agenda for negotiating with several dozen trading partners.
Countries identified in these reports, which are produced annually, reliably include all major trading partners. The most recent version included 55 countries plus the EU and the Gulf states. Focusing on the most important of the 55 would enable the administration to get the biggest bang for its (export) buck—especially if it expects to make material progress in only 90 days.
Under the current administration policy, countries that would be subject to the most significant tariff hikes do not feature in USTR’s report, including Lesotho (50 percent), Madagascar (47 percent), Myanmar (44 percent), Sri Lanka (44 percent), Mauritius (40 percent), Guyana (38 percent), and Botswana (37 percent). Following through on these tariffs would add less than $8 billion per year in additional revenue to the US Treasury, assuming 100 percent elasticity of demand, which is a stretch (pun intended). More likely, the tariffs would be so prohibitive that exports to the US would fall sharply and imports from the US would, at best, remain at current levels. This is a lose-lose proposition.
This outcome is a reflection of the head-scratching methodology that the administration applied to calculate its tariffs, which used bilateral trade deficits as a proxy for barriers to trade and excluded trade in services, where the US is competitive. As a result, this formula spit out high tariffs for countries with large trade surpluses, regardless of the significance of the trading relationship or perniciousness of the trade barriers. There is a (rare) consensus among economists that focusing on bilateral trade accounts does not make good policy sense; it is the aggregate trade account that matters. Even in a world with no barriers, the US would have deficits with some countries and surpluses with others. But more to the point, the administration has already identified the biggest obstacles to US exports, both by barrier and country, which would serve as a much sounder basis for bilateral negotiations.
As part of this more targeted strategy, the administration should also exempt countries whose total trade with the US falls below a relatively low threshold (e.g., $100 million, $1 billion. or $5 billion) especially if they are low- or lower-middle-income countries. There is a compelling economic rationale for this approach:
- Most of the countries whose total trade with the US falls below the $5 billion threshold are too poor to import more US products or too small to absorb them. If moving from trade deficits to surpluses by increasing US exports is a goal, then the administration should adopt policies to spur growth in these markets, not squash it, which is what high tariffs would do.
- Most exports from these countries are either energy-related (and thus exempt from tariffs) or in sectors that the US cannot or should not want to nurture; this includes cotton, cocoa, vanilla, tea, coffee, rubber, and rice. These products do not produce good jobs—the labor is hard and the pay is low. Plus, the US lacks hospitable climates and terrains for growing most of them.
- Exempting most countries from tariff increases would provide much-needed policy clarity, helping stabilize trade relations, and reduce the uncertainty that is constraining investment and undermining consumer confidence.
As shown in the map below, in 2024 trade volumes between the US and 84 countries fell below $5 billion. The map is interactive, and countries can be viewed by which threshold they fall under (under $100 million, $100 million–$1 billion and $1 billion– $5 billion) or by income level. This is how they break down: 28 fall in the under $100 million category; 37 fall in the $100 million–$1 billion category; and 18 fall in the $1 billion–$5 billion category. Twenty-four are low-income (LICs), 33 are lower-middle-income (LMICs), 16 are upper-middle-income (UMICs), and 11 are high-income (HICs). Most of the trading partners in the $100-million-and-below category are low-income countries.
We excluded several very small countries whose trade volumes fell below $10 million in 2024, including Andorra, Dominica, East Timor, Kiribati, Kosovo, Nauru, Suriname, Tongo, Tuvalu. and Vanuatu. We also treated the Caribbean as one block because their combined trade with the US in 2024 amounted to only $3.2 billion.
Exempting the 28 countries in the under-$100-million category is a no brainer because they accounted for only 0.04 percent of total US trade in 2024. Countries under $1 billion would cover 65 countries and 0.38 percent percent of 2024 US import volumes. Adding the last set ($1–$5 billion) would cover 84 countries and 1.49% percentof total trade—still a tiny fraction.
Fifteen out of those 84 countries are included in USTR’s latest trade barriers report:
- LIC: Ethiopia
- LMICs: Bolivia, Laos, Côte d’Ivoire, Ghana, Kenya, Angola, and Tunisia
- UMICs: Paraguay and Uruguay; and
- HICs: Bahrain, Brunei, Kuwait, and Oman.
On that basis, USTR could choose to pursue negotiations with these countries (rather than grant them exemptions), although here too selectivity is warranted. For example, the US has free trade agreements with Oman and Bahrain (so there is little left to negotiate) and Uruguay and Paraguay’s obstacles to trade merit just a page each while China’s section is nearly fifty pages long.
The bottom line is that dozens of countries will be collateral damage in a global tit-for-tat that they did not want or instigate, and penalizing them for their trade imbalance offers little to no upside for the US. For the poorest among them, the burden of additional tariffs could lead to widespread job losses, increased rates of poverty, and slower growth while the impact on the US economy would be negligible. This fact alone should be ample reason not to raise additional barriers to US markets. But if not, the administration should recognize that the time and effort needed to extract concessions from these countries would not advance their goals of expanding US exports, increasing revenues, or creating manufacturing jobs. On the other hand telegraphing some policy clarity now would have the benefit of calming consumers and investors. And that is a significant upside that would come with virtually no effort.
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