The Global Trade Tsunami: Emerging Markets Poised for Take off

Dr. Ossama Shaheen

In the past few days, the United States has adopted a series of protectionist measures aimed at safeguarding its local industries and correcting what it perceives as imbalances in its trade relationships. These policies have materialized in the form of increased tariffs on imports from a wide range of countries, including both emerging and advanced economies. The underlying economic rationale is to reduce the U.S. trade deficit and stimulate domestic manufacturing. However, these actions have had significant global repercussions, particularly for emerging markets that rely heavily on exports to the United States. At the same time, these changes have opened new doors for such markets to expand their exports to alternative destinations and attract domestic investment, leveraging their low production costs and the relatively moderate tariffs the U.S. still applies to certain imported goods.

In April 2025, the U.S. administration introduced a new tariff policy, imposing a minimum 10% duty on all global imports, with significantly higher rates for specific countries. For example, China now faces tariffs as high as 54%, while Southeast Asian nations such as Vietnam, Laos, and Cambodia are subject to rates around 49%. This approach has been widely criticized by economists for relying on an overly simplistic and misleading formula—dividing the U.S. trade deficit with each country by the total value of imports from that country, then halving the result to set the tariff rate. This method disregards complex factors such as currency dynamics and domestic consumption patterns, ultimately imposing disproportionately high tariffs on poorer countries with limited trade volumes.

These measures have had a considerable impact on emerging economies, many of which depend on the U.S. as a major export market. The new tariffs have disrupted global supply chains, slowed economic growth in several countries, and jeopardized jobs in critical export sectors. Albert Park, Chief Economist at the Asian Development Bank, warned that these blanket tariffs could significantly decelerate economic growth both in the U.S. and globally, particularly harming East Asian markets.

One striking example of the negative fallout is the case of Lesotho, a small African nation that once benefited from duty-free access to the U.S. under the African Growth and Opportunity Act (AGOA). Although its annual exports to the U.S. are valued at approximately $230 million, Lesotho now faces a 97% tariff, driven by its limited import volume from the U.S. This threatens its textile sector, a cornerstone of its national economy.

Nonetheless, within these challenges lie powerful opportunities for emerging markets. First, these countries can diversify their trade partners, reducing their reliance on the U.S. market. China, for instance, has started to pivot toward domestic demand and expanded its trade relationships beyond the U.S. Second, regional trade agreements can be strengthened to facilitate greater exchange between countries in the Global South. Additionally, this crisis could serve as a catalyst for attracting foreign direct investment, particularly in low-cost manufacturing sectors, by offering investors favorable conditions and improving the business climate.

Emerging economies can also focus on industries where they hold a comparative advantage—such as low labor costs or abundant natural resources. For example, countries rich in raw materials could invest in value-added processing industries to reduce dependence on unprocessed exports. Moreover, there are still sectors where U.S. tariffs remain low, such as agriculture and textiles in certain countries—sectors that present clear opportunities for boosting export revenues.

Among those poised to benefit from the current climate is Egypt, which faces a relatively low 10% tariff on its exports to the U.S., compared to the steep rates imposed on countries like China and several Southeast Asian nations. This competitive edge allows Egypt to penetrate the American market more aggressively with lower-priced, high-demand goods, particularly in industries where it has an advantage such as textiles, food processing, and light chemical products.

From an economic standpoint, Egypt can leverage this moment to attract foreign direct investment into its local manufacturing sector, capitalizing on its strategic geographic location, low production costs, and favorable trade agreements that offer preferential access to global markets. International investors—especially from countries burdened by higher tariffs—could relocate their production lines to Egypt to benefit from lower costs and more flexible export conditions to the U.S

In this context, the Qualified Industrial Zones (QIZ) protocol between Egypt and the United States stands out as a strategic advantage. Under this agreement, Egyptian products—particularly in the textile and food sectors—can enter the U.S. market duty-free, provided they include a specified percentage of American content. This trade arrangement sets Egypt apart from other nations now burdened by higher tariffs, offering a clear competitive edge in terms of pricing and market access. As tariffs rise for many Asian exporters, Egypt’s QIZ access presents a powerful opportunity to scale up its exports and position itself as a regional manufacturing and export hub.

To fully realize this potential, Egypt must continue to improve its business environment by streamlining customs and administrative procedures, offering tax incentives, and investing in industrial infrastructure—particularly in strategic zones like the Suez Canal Corridor and special economic areas. Additionally, investing in workforce development will be key to enhancing product quality and increasing competitiveness on the global stage. Given the current shifts in global supply chains, Egypt is well-positioned to emerge as a regional manufacturing and re-export hub—especially if it markets itself as a stable and open industrial alternative in an increasingly protectionist world. This moment could mark a turning point in Egypt’s economic positioning, expanding its role in global trade through the gateway of the U.S. market.

In conclusion, the United States’ current protectionist policies pose serious challenges for emerging economies. Yet, they also offer a strategic opportunity to reconfigure economic paths, diversify export portfolios, and reduce dependency on volatile global trade dynamics. By focusing on value-added sectors, fostering regional cooperation, and cultivating an attractive investment climate, emerging markets can turn these global disruptions into tangible opportunities for sustainable growth and economic resilience.