According to the ODI Global think tank, the policies could reduce exports and aid by an amount equivalent to 0.5% of the affected countries’ GDP, with some nations facing losses exceeding 30% of their economy.

The world's 114 low- and middle-income countries (LMICs) could lose a combined $89 billion annually from lower exports to the United States as a result of new reciprocal tariffs, according to a report published Thursday, August 14, 2025, by the ODI Global think tank.

The report, titled "Vulnerability of low-and middle-income countries to the impacts of aid cuts and US tariff increases," found that the potential losses for these countries, excluding China, would be equivalent to 0.5% of their total GDP. These figures are based on rough estimates, assuming that a 1% rise in import prices leads to a 1% drop in demand, and that tariffs are fully passed on to consumers.

The study used 18 indicators to assess the impact of higher U.S. tariffs and announced aid cuts from the U.S. and several European donors. The potential losses from a drop in exports to the U.S. market are particularly high in some economies, reaching as much as 4.5% of GDP in Vietnam, 4% in Cambodia, 3.7% in Nicaragua, and 1.8% in Thailand. If recent threats to increase tariffs on imports from Brazil, India, and Mexico are included, the total potential reduction in export value for all low- and middle-income countries rises to $241 billion, or 1.3% of their combined GDP.

The report also found that aid cuts announced by the U.S. and some European nations will affect 126 low- and middle-income countries, with total reductions reaching $39 billion in 2025, or 0.2% of their cumulative GDP. The impact will be even more severe for low-income countries (LICs), which face combined losses equivalent to 1.8% of their GDP from aid reductions. Fragile, small island states like the Marshall Islands and Micronesia could face a substantial shortfall of more than 30% of their GDP from aid cuts alone. The cuts could also disproportionately affect conflict-ridden nations like Afghanistan, Somalia, South Sudan, and Ukraine, with aid reductions estimated to range from 6% to 39% of their GDP.

Globally, LMICs will be directly exposed to the effects of aid cuts and higher tariffs depending on their reliance on aid and the importance of the U.S. market to their exports. For example, Vietnam’s merchandise exports to the U.S. in 2023 were equivalent to 23% of its GDP, while aid from the main donors who announced cuts represented 47% of Micronesia’s GDP during the same year. LMICs could also be indirectly exposed through global trade and financial channels, as well as through their own resilience to external shocks.

Based on 18 indicators of exposure and resilience, the most vulnerable countries, in order, are: Burundi, South Sudan, Lebanon, Mozambique, Pakistan, Sao Tome and Principe, Somalia, Sudan, Ukraine, and Afghanistan. Six African countries are on this list of the top 10 most exposed. While some countries, such as Ivory Coast and Tanzania, are less exposed, the report notes they must remain vigilant against other risks stemming from the new U.S. economic policy, including slower-than-expected growth in China and the uncertain future of trade preference programs like the African Growth and Opportunity Act (AGOA).

The report suggests several strategic measures for governments to build resilience to these dual shocks. It recommends that governments build up reserves by restructuring their debt toward more long-term, concessional financing. When a country's policy allows it, central banks can also prepare a set of monetary policy measures and liquidity facilities to deal with potential exchange rate volatility and a credit crunch. In the medium term, diversifying production and establishing new trade relationships and partnerships would help build overall economic resilience.

Walid Kéfi