Tariffs, Trump, and the Global South
Trump’s trade war is framed as a battle with China—but its fallout is exposing just how little power African economies have in a rigged global system.
Southampton, Hampshire, UK, 2019. Image © Amani A via Shutterstock.
- Interview by
- Faisal Ali
“Liberation Day” was how US President Donald Trump described it as he gleefully waved a bill introducing sweeping tariffs against his country’s global trading partners. “Taxpayers have been ripped off for more than 50 years,” he added, characterizing himself as America’s solemn defender. “But it is not going to happen anymore.” Despite widespread attempts to explain to Trump that it is American consumers who will have to absorb the cost of these new measures, the President has resolutely pressed ahead. One EU official said it is more an “inflation day” than a “liberation day.” Trump’s goal is ostensibly to restore manufacturing to the US, but as pointed out by the celebrated South Korean economist Ha-Joon Chang, you need a strategy to build an industry, not just punitive taxes for companies that want to sell things in your market. In just a few days, the tariffs have triggered instability in global stocks and sent the dollar plunging.
The measure has been met with widespread criticism from both friends and foes alike, neither of whom has been spared. David Lammy, the UK foreign secretary, suggested that Trump’s policy has taken the US back a century. The French President, Emmanuel Macron, described the tariffs as “brutal and unfounded.” Beijing, which exports a large number of goods to the US and faces a 104% tariff, warned that there would be no winners in a trade war and called on the US to stop “unilateral bullying.”
Even the world’s most important financial papers haven’t spared Trump. The Financial Times called it an “astonishing act of self-harm,” while the Wall Street Journal said the only real winner would be China’s leader, Xi Jinping, describing the tariffs as a “strategic gift.”
In Africa, the picture is somewhat more complex. Most countries have been hit with the lower end of the tariff spectrum, facing a 10% levy, but the highest have been borne by Lesotho (50%), Madagascar (47%), Mauritius (40%), and Botswana (38%). The measures also imperil the US’s existing preferential trade arrangements with select African countries through the African Growth and Opportunity Act (Agoa), which allows them to export goods to the US market on favorable terms. However, energy imports and key commodities have been exempted, which are Africa’s main contributions to the global economy. Agriculture has been more mixed.
Theoretically, that should shield these countries from the impact of these measures, but it isn’t that clear, argues Aboulaye Ndiaye, a professor at New York University, Stern School of Business. Ndiaye, a former US Federal Reserve economist, speaks to Geeska about the impact he expects the tariffs will have, what African countries can do to mitigate them, and why we need to rekindle more organic trade routes that can help support intra-African trade.
When I went through the list of tariffs on Africa, I wondered whether it would have any impact on the continent, given that the US introduced exemptions on a long list of metals, oil, and gas—Africa’s primary exports. Libya, for example, got 31% but only really exports oil. Are we being too complacent if we say that the impact on African trade, for the most part, is somewhat exaggerated at this stage?
That is a great question. So, if we look at it by looking at each country and say their primary exports are not affected, so that the practical impact is limited, that would definitely be a risky view. So, yes, it is likely that the immediate impact might not be that large in many places, but there will be secondary impacts because we face the world, and it will respond and retaliate, as we’re in a global trade war now. We know, for example, that stock markets are affected, and when capital gets scarce, Africa is one of the places where people pull the trigger first. There are also large oil exporters, like Angola, Nigeria, and Algeria, who rely a lot on oil, so the drop in global oil prices will have an impact on their businesses and budgets. But even this will help others who are energy importers—like Kenya and even Senegal.
As Africans, we need to think about how we will align and what our responses will be.
Trump is basically complaining that the US has a negative trade balance with many countries around the world, which is one of the things he believes these tariffs will remedy. This means most of us sell more stuff to Americans than we buy and he thinks that is linked to the punitive tariffs many countries have on American goods. Will this help the US rebalance its trade with its African partners?
It’s like me going to my barber with whom I have a negative trade balance because I basically import a service from him. And if, someday, I wanted to have a positive trade balance, I would add a tax on him cutting my hair and try to begin cutting his. That logic basically doesn’t make sense. So, the bottom line is we need to think about the long-term impact here. And I don’t mean a few months, but over the course of years. We shouldn’t take too drastic measures then, but we do need to seek alternatives.
Most African countries also carry out the majority of their trade with China today, not the US. I think there are a handful of exceptions where the US is the main trade partner. But how much will that dampen the impact of these tariffs in your view across the continent?
It will dampen the impact because it means they’ve diversified their trade partners, but they need to go further. Some commentators are now thinking about how we will do more trade among ourselves—among Africans, I mean—and increase intra-African trade. But we need to negotiate more bilateral trade agreements, country-specific ones, inside and outside Africa to help explore more alternatives. This includes the US, so they need to pick up the phone.
Two countries have managed to avoid the tariffs altogether. Those being Somalia and Burkina Faso. Why were they able to dodge this bullet?
Well, do you know which other country managed to dodge this? Russia. Most people got at least 10%. So, I think part of it is that these countries don’t have that large a trade volume with the US.
Lesotho was flagged as a country facing a huge challenge because of Trump’s measure. They face a 50% tariff on a sector that accounts for around 20% of their trade. The country’s trade minister, Mokhethi Shelile, has said he’s worried about job loss and factory closures. How should other cases like Lesotho, of which there aren’t many, deal with this problem?
For Lesotho 50% is huge. Factory closures are a major concern. But let me give an example from the first Trump term, where there was a trade war. Many Chinese companies just took their machines and factories from China, unscrewed everything, moved their equipment to Vietnam, where there were lower tariffs, and continued exporting to the US. Right? So, there are alternatives for these companies, they can shift their production. Lesotho, and countries like it, can also consider third countries where they might reroute their production.
Overall, the major concern for me is the cumulative impact of these tariffs and their repercussions at a time when the US has also cut foreign aid to African countries. The budgets of these countries are quite strained, and it is difficult for them to raise money through private markets. These are the vulnerabilities, cumulatively, that are currently the most challenging.
Intra-African trade has long been a challenge across the continent. Almost all countries, with a few exceptions of those that export to South Africa, have extra-continental trade partners. Some efforts have been made in this regard, such as a continent-wide free trade area and regional free trade blocs like the East African Community. Why haven’t these efforts moved forward more quickly and altered the trade structure for African economies?
As you’ve pointed out, there have been some ambitious initiatives. You have the East African bloc, the West African bloc, and the Southern African bloc, and they all have their own trade agreements. And now, you have the African Continental Free Trade Area. But, unfortunately, these are all paper tigers. They don’t contribute much. There are still many barriers to trade. The infrastructure that facilitates it isn’t well developed, there are cumbersome customs procedures, regulations are not consistent, and finally, there is still considerable political resistance to further integration.
We need a better understanding of history over its long durée to solve some of these issues, instead of just thinking about ourselves in terms of colonization or post-colonization. If we look at the trade agreements that make the most sense for African countries they are not the ones that have been constructed over the last 60 years in the postcolonial period. Rather, you would see more natural links. For example, me having this conversation with you, I’m from Senegal and you’re from Somalia—the link is closer than you think. Take Saudi Arabia, which is an important trade partner for your country; that path is also a well-travelled one for West Africans, like Mansa Musa, the most famous, who went from Mali to Hajj. There were many trans-Saharan and trans-Sahelian trade routes.
I don’t know if you’ve seen the film Io Capitano, which depicts this. It’s a movie about migration but it isn’t just a film showing people leaving Africa and arriving in Europe, it also shows the path. They go from Dakar in Senegal, passing through Mali, Niger, N’Djamena and end up in Libya where they face many difficulties. So all these parts of the world have become embroiled in terrorism and conflict, but if you look at the longer history, this path was one that was rich with trade and exchange, which was organic trade, that has been well-documented by historians. The point I’m making here is that if we apply the economic concept of persistence, which considers how existing patterns tend to become endogenous, these blocs we now have are not really grounded in these longer, more persistent patterns, these trade paths that have existed for years. People have traded gold, salt, and other things from the shores of Senegal along these migration routes, north to the Mediterranean and across the Sahel to the Red Sea.
The geographies where African affinities and trade patterns lie are different from these blocs we’ve established based on language and other considerations. These longer historical trade paths need more infrastructure and other things to support them and we need to re-think that.
