Saudi Journal of Economics and Finance (SJEF)
Volume-9 | Issue-11 | 457-474
Original Research Article
Tariff Policies and International Trade Flows: Impacts on Developed and Developing Economies
Olawale C. Olawore, Taiwo R. Aiki, Oluwatobi J. Banjo, Victor O. Okoh, Tunde O. Olafimihan
Published : Nov. 15, 2025
Abstract
The paper analyzes the effects of tariff policies on international trade flows and national competitiveness between 2018 and 2025, a time of revived of protectionism, the COVID-19 crisis, and a general surge in supply-chain disruptions. Using harmonized data sources provided by WTO, UNCTAD, World Bank, and IMF, we implement a two-way fixed-effects gravity model in order to provide a rigorous assessment of the effect of tariff changes on trade flows between developed and developing economies. To help counter the possibilities of endogeneity, we create a weighted tariff shock variable and apply system GMM regressions. We further expand the study with multidimensional measures of competitiveness such as export sophistication, logistics efficiency and innovation capacity in order to confirm the consistency of our findings. The findings are all consistent with the conclusion that increased tariffs reduce the performance of exports, and the negative effect is most pronounced in developing economies that are defined by a small industrial base and low technological potential. On the other hand, those economies that have high regional trade relations and sophisticated digital infrastructure have more resilience to tariff shocks due to diversifying supply chains and updating technology. In our analysis, we find that there are always negative impacts on the performance of exports due to higher tariffs, but the most negative impacts were observed in developing countries that are not technologically developed and whose industrial bases are small. The article provides practical policy advice on the need to balance short term industrial security with long-term economic sustainability in a more globalized economy.