U.S.-China ‘trade war’: What implications for Nigeria?
By Prudence Arobani
The escalating trade disputes between the United States (U.S) and China have kept the global markets on their toes with uncertainties pervading the global economy and implications for other countries.
Analysts say the trade tensions between the world’s two largest economies portend consequences in commercial relations among countries as it has repercussions in differing degrees for some of these countries.
China constituted U.S. largest supplier of imported goods worth more than 500 billion dollars in 2017 while U.S. exports to China was approximately 185 billion dollars at the same time.
However, U.S. President Donald Trump imposed varying degrees of tariffs on billions of dollars worth of Chinese products starting early 2018 and China also retaliated with its own tariffs on U.S. goods.
Since then, both countries have engaged in full-blown tit-for-tat measures that have unsettles the global markets in different degrees, which is gradually manifesting to a full-blown trade war.
Political-economists express concerns that African countries could be hit because of the global network of economies in that what affects the U.S. and China’s economies affects the entire global economy.
They say for instance, the impact was largely felt on the stock markets in Nigeria, Kenya and South Africa – with Nigeria and South Africa being the two largest economies on the continent.
Mr Lawrence Freeman, a U.S.-based Political-Economist Analysts for Africa, said that the trade war brewing between the two world superpowers could have dire economic consequences for Nigeria.
Freeman said: “If President Trumps precipitates a full-blown tariff war; it could disrupt the world economy, inflict financial penalties on China, and undermine China’s currency.
“This could lead to harmful effects for Nigeria, since both nations are coordinating currency transfers and have worked together to improve, Nigeria’s agriculture with billions of dollars of investment’’.
He opined that Trump’s trade war with China has serious political, economic, and even military implications for all nations of the world, alleging he has little understanding of how an economy functions, and how to achieve real economic growth.
He said after Trump announced tariffs on Chinese goods and China retaliated with tariffs on most agricultural imports from the U.S, there is a possibility of trade diversion.
Trade diversion means that while U.S. and China are having this battle, many of their market groups will be dumped on other markets to ensure that they do not over-consume or overproduce.
Trump is a follower of the myth of free-trade “buy low-sell dear” without regard for the economic security of a nation.
“For example, in the most recent meeting between Presidents Trump and Muhammadu Buhari, Trump proposed increasing the sale of U.S. agricultural products to Nigeria. This is the absolutely wrong approach. Nigeria should be reducing the amount of food imports by building up its agro-manufacturing sectors,’’ Freeman said.
Freeman also said that China, on the other hand, has embarked on an economically healthy policy of investing in infrastructure in Nigeria and Africa to drive economic growth, as evident in the Belt and Road Initiative.
According to him, Nigeria, like the rest of the African, needs massive investment in hard and soft infrastructure.
He noted that in collaboration with China, Nigeria is building railroads across the country for the first time since colonialism, observing further that this, with increasing energy production, “is essential for Nigeria to develop and achieve stability.
“President Trump should be more thoughtful in helping Nigeria overcome its huge infrastructure deficit, by joining China in expanding the BRI in Nigeria and across Africa’’.
In his view, Mr Kenneth Shobola, President of the U.S.-based Nigerian-American Business Forum, said that Nigeria could take advantage of the U.S.-China escalated trade war and find long-term sustainable deals.
“It is my considered opinion that Nigeria should be extremely careful and vigorously strategic in her dealings both with the U.S. and China and not be seen as a fall back option or dumping ground for either country. I mentioned strategic because it can also be a perfect opportunity to obtain some major concessions from both countries, particularly in areas of great interest to Nigeria such as agriculture, healthcare, education, power generation and finance”.
“Recently, we were able to receive arms purchase and support from the U.S. and some agricultural arrangements, details of which I’m not terribly familiar. It is critically important that whatever deal we negotiate are not just stop-gap short-term measures to assist either of these giants get beyond this trade war. Rather, we should look to negotiate long term sustainable investments and deals that promote our economic growth and advancement”.
“African countries at large need to adopt the same approach, though a coordinated effort may be challenging as some countries need the capital injection more than others, hence, varying degrees of economic need’’, Shobola said.
Sharing Shobola’s views, Dr Kazeem Bello, a U.S.-based Global Economy and Strategic Investment expert, said that Nigeria could take advantage of the trade war by striking a major trade deal with China or U.S.
Bello said “there is a potential threat to the global trade system as a result of the current trade stand-off between the two world’s largest economies adding, it is worries for economists and financial experts’’.
He said that the impact of the trade war would bring short and long-run effects on the global economic system and create opportunities for countries that were creative and smart to take advantage of it.
Also, at the recent Forum on China-Africa Cooperation in Beijing, China sought to further expand trade with Africa as a way to reduce risk from the U.S. trade dispute.
According to him, China is Africa’s biggest trading partner and the value of trade with the continent for the January to July period grew 20 per cent year-on-year, with imports jumping 30 per cent to 56.8 billion dollars and exports to Africa climbing 10 per cent to 59.3 billion dollars.
Bello said that China was repositioning for a long-term strategy by announcing a 25 billion-dollar programme to support alternative sources through the Commonwealth of Independent States countries plus Russia should Trump get re-elected.
“This is where Nigeria and other African Countries can step in to institute the right infrastructure frame of minds to attract the Chinese to invest part of these funds in Africa on a sustainable long term perspective. This will help increase agriculture projects and production, processing, and enhance full value chain strategies in Africa; it will also assist to decrease unemployment and serve as poverty alleviation strategies.”
“China is looking to African countries for these challenges but the depth of the problems is that China equally knows Africa countries are generally not serious about agriculture in spite of having the largest continent with cultivatable and arable land mass on earth,’’ he observed.
Analysts, nonetheless, insist that African countries should use the trade war to focus on improving the low trading among themselves as it is the single biggest opportunity that is standing before the continent to develop.
They note that the trade war could be an opportunity for Nigeria or Africa to secure long-term sustainable deals or hurt its economy if it fails to identify and take the opportunities.