Global Trade Faces Headwinds

Borders that are crisscrossed more frequently by trade in goods and services are less likely to be besieged by soldiers and other armed elements, buttressing the fact that trade dividends are not just related to development, growth, and prosperity, but also include peace and mutual understanding through dialogue among civilisations. With the proliferation of regional free trade areas across the world, it is without doubt that trade makes concrete contributions to the economic growth of many countries, and trade promotion has become an existential part of contemporary diplomacy.

International trade expos have emerged as a central theme in the contemporary international system. With trade becoming indispensable for nations, attempts and efforts to disrupt trade will have implications not only for how nations thrive, but, more importantly, how they survive.

Critical for growth

In Africa, there are broadly shared views that trade constitutes a formidable path not only to poverty reduction, but also to economic recovery and the prosperity of the region. It is also widely recognised that the mono-structural framework of the economies in Africa, which is both a legacy of colonial domination and a consequent skewed trade arrangement with former colonial overlords, is grossly inadequate to generate returns on trade for sustainable improvements in national economies.

Economic diversification and added value have been the core themes of Africa’s approach to development and trade policies. This approach is more likely to succeed in a stable international trading system that is now being bombarded by the use and abuse of tariffs.

US President Donald Trump has justified his disruptive “reciprocal” tariffs, arguing that other countries in the world take advantage of the US market. But the argument misses the point that the problems and challenges of market access are sometimes related to the structure and nature of individual national economies.

Amid widespread opposition, Trump signed an executive order on the so-called “reciprocal tariffs” on 2 April, launching the trade wars. All imports would be subject to 10 percent additional tariffs, except as otherwise provided, the executive order said. This took effect on 5 April. The US would also impose an “individualised reciprocal higher tariff” on the countries and regions with which the US “has the largest trade deficits,” which took effect on 9 April.

Trade wars are not a cure-all for the structural maladies of the advanced capitalist economies, especially the US. The problem is the pyramid structure of their economies and societies, where the working people are the proverbial cannon fodder and expendables. Bernie Sanders, senator from Vermont, has said that “it is not just that one tenth of 1 percent owns more wealth than the bottom 90 percent. They don’t put their wealth underneath their mattresses, right. They use that wealth to perpetrate, perpetuate their power. And they do that politically.”

From the point of structural constraint, the US can unshackle itself and become an eminent trader again. But the US does not seek to remedy what ails her from within, but rather engages in geopolitical manoeuvring with trade disruptions as one of its key strategies. China is the US’ most obvious target in the tariff wars and trade disruptions.

China’s role

China happens to be the world’s foremost trader and investor. As the largest trading partner for more than 100 countries, China is as much an opportunity to the world as the world is to China. China has been Africa’s largest trading partner for 14 years in a row and has also offered zero tariffs on 100 percent of goods from the least developed countries, including 33 from Africa, which has been a boon and veritable gateway out of poverty for these countries.

Recognising that trade and investment would be pivotal to the economic diversification strategies of African countries and central to their sustainability and growth, the 2018 Summit of the Forum on China-Africa Economic Cooperation in Beijing instituted the permanent mechanism of the China-Africa Economic and Trade Expo, which is held every two years in China’s Hunan Province. At the third edition of the expo held in 2023, a total of 120 deals valued at $10.3 billion were signed, with the expo providing a platform for African producers and traders to explore new export markets and for Chinese consumers to find high-quality, low-priced products.

Against the background of vigorous trade exchanges between China and Africa, the US’ disruptive trade wars present both opportunities and challenges. The Chinese market and investment remain critical to Africa’s development. The emerging framework of currency swaps enabling Chinese and African businesses to conduct transactions in their national currencies without the medium of a third currency would bolster exchanges. The African Continental Free Trade Area offers an integrated market and investment destination. Trade would be a major harbinger of Africa’s ambitious development goal called Agenda 2063, and China, as Africa’s foremost trading partner, will be an important enabler in the continent’s trajectory to peace, stability, and prosperity. Strengthening cooperation with a view to building strategic resilience into its trajectories would guarantee long-term prospects with minimal impact of the trade disruptions.

Despite the fact that trade wars are unwinnable and need not be fought, it would be hard to persuade the current US leadership against it. But translating the obsessive geopolitical fantasy of America’s exceptionalism and hegemony into disruptive trade wars would backfire. Globalisation and the trends of inclusion are an irreversible tide in human progress.

Inward and toxic nationalism is at best ephemeral and transient. Trade may sometimes be unfair, but the compelling dividends of trade mean that such situations are better addressed with more, and not less, trade. Quite a number of regional free trade areas exist to address lacunas in trade, and therefore the international system is not short of rules to engage in issues of trade disputes. While the mechanism of the World Trade Organisation is evidently weak, it remains the critical framework for building consensus on basic trade rules.

The US has ample leeway to redress her trade concerns and grudges without launching disruptive trade wars.

During the COVID-19 pandemic, the US’ initial refusal under President Trump to engage in broad international cooperation to contain the outbreak made it pay a disproportionately high price, with more COVID deaths than any other country in the world. Now, not only turning its back on global trade but even disrupting it, the current US administration cannot entertain any illusions that there would be no consequences.

The author is director of the Centre for China Studies, Abuja, Nigeria.