5 days ago
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Official portrait of President-elect Donald Trump. Photo: Trump-Vance transition team
ON February 10, President Donald Trump imposed a 25 per cent tariff on steel and aluminium imports into the United States. Trump said, “It’s 25 per cent without exceptions or exemptions. That’s all countries, no matter where they come from, all countries.” Things will get messier for global trade.
The European Union vowed to retaliate if Trump imposed tariffs on EU exports to the US.
Earlier, Trump imposed a 10 per cent tariff on some Chinese products. China retaliated by imposing tariffs on a range of US products from February 10.
The US is the biggest economy in the world, with a GDP of $27.36 trillion, while China is the second largest with a GDP of $17.96 trillion. Thus, a trade war between them will affect the global economy.
Trump said he imposed tariffs on Chinese goods to pressure Beijing to do more to stop the flow of the deadly synthetic opioid, fentanyl, into the US. China is said to be a major source of the chemicals used by cartels in Mexico to make the drug.
On the clash, a Chinese Foreign Ministry spokesman said both sides would lose.
Trump earlier imposed 25 per cent tariffs on Mexican and Canadian goods and later said he had suspended the implementation for 30 days.
In the days ahead, Trump may still roll out more tariffs. He sees the tariff hike policy as a negotiating tool either to stem the flow of fentanyl into the US from Canada, Mexico, and China or to get a fair-trade deal from trading partners.
The policy is also targeted at encouraging local production by making foreign goods more expensive.
Trump believes tariffs will boost US manufacturing, protect jobs, raise tax revenue, and grow the economy.
In 2024, the US had a trade deficit of $213 billion with the EU and $292 billion with China.
International trade watchers believe that Trump’s 25 per cent tariffs on steel and aluminium imports will hit Canada, Brazil, Mexico, South Korea, Vietnam, and Japan the most. These countries are the largest exporters of the products to the US market.
If implemented to the letter, it could force the countries to look for new markets but spur production growth among US steel and aluminium producers. The affected countries might impose retaliatory tariffs on US goods.
The trade war that Trump is igniting could significantly affect the US and the global economy.
There have been forecasts that the US could see a modest rise in inflation because of the tariffs.
It is a possibility that a trade war could slow down global trade volumes, which will slow global economic growth and lead to higher prices.
Higher inflation will push up interest rates and borrowing costs. Higher prices could hinder demand and have a knock-on effect on businesses and consumer spending.
Nigeria is a big exporter of crude oil to the US but equally a big importer of non-oil products like cars and other products from the US. The Trump tariff hike policy may see Nigeria importing some inflation from the US through the envisaged rise in inflation in the US market because of the policy.
Therefore, Nigeria needs to buckle down by implementing policies that would reduce the country’s import dependence. Producing most goods locally will be the most effective antidote against any headwind from an international trade war.
The countries involved in the tariff clashes can produce almost all they need domestically. So, developing countries like Nigeria, rather than limiting themselves to the roles of ‘dumping grounds’ for foreign goods, need to revive their manufacturing sector to export more.
