Abstract

Escalating trade costs, driven by new tariff regimes, the COVID-19 pandemic, wars, and sustainability-driven legislation, have disrupted global supply chains and challenged the traditional model of trade-led development. The latest disruption affecting global supply chains are the recent 2025 US tariff measures. This policy brief analyses the welfare and export impacts of these tariff measures, highlighting the uneven effects on industrializing countries. Case studies from Kenya and Cambodia reveal that countries with diversified export portfolios and flexible sectoral compositions, like Kenya, are better positioned to benefit from trade diversion. The results show that beyond direct tariff exposure, indirect effects through global supply chains can amplify vulnerabilities to trade policy shifts. The brief underscores the need for strategies including export diversification, value addition, strong domestic and regional supply chains, quality infrastructure, supportive trade policy, and investment. These measures are vital for enhancing resilience and enabling countries to seize new opportunities in a global environment where trade disruption is increasingly the norm.