The purpose of this paper is to examine neutrally/without bias how the rising protectionism and trade wars followed in developed economies like the United States of America (USA), European Union (EU) and other developed economies have affected the developing economies like India, South Africa and so on specifically since the year 2010. Worth mentioning that just like pain killer provides a instant relief to an individual, Protectionism and Trade War might deliver temporary relief to a economy; however, in the long term, Protectionism and Trade War diminishes efficiency, innovation, and global economic welfare.
When the developed economies (for instance the US, UK, EU, Japan, and so on ) adopt the protectionist measures— export controls, tariffs, import quotas, subsidies, and non-tariff barriers—the repercussions spread its wings across the entire global economy. Consequently, The effects on developing economies include higher costs, slower growth, unemployment risks, and the stalled convergence.
It is pertinent to mention that the practice of following Protectionism and trade wars poses a serious risk to the developing economies and it is necessary to clear the air about it. Reason can be attributed to their dependence on exports, imported inputs, and the global value chains. Consequently, The side-effects include higher costs, slower growth, unemployment risks, and the stalled convergence. To manage this dilemma in present facts and circumstances , the aforesaid developing countries requires a resilient trade-law frameworks both within their borders and in alignment with the multilateral system (WTO). Thereafter, it must be complemented by the domestic regulatory, investment and the export support laws.
Coming to factsheet, some repercussions of protectionism and trade wars on Developing Economies have been quantified and presented as follows:
The Foreign Direct Investment and investment flows are volatile. As per UNCTAD’s World Investment Report 2025, global FDI fell tectonically in 2024 (FDI down ~11% to ~US$1.5 trillion)
A working paper of IMF cited by the World Bank suggested the GDP losses to around 5%. Moreover, welfare costs up to ~12% under the severe decoupling scenarios.
The stock of the import-restrictive measures in force is gigantic and growing also : In the mid-October 2024 the World Trade Organization estimated that the trade restrictions have been affecting about US$2.95 trillion of world imports (i.e.≈11.8% of world imports).
Proposed Legal Solution
Finally, an integrated set of legal reforms, also termed as legal healing measures have been proposed. They are inclusive of
They are designed to address short-term disruption while maintaining long term openness.
