US and China trigger the biggest trade war ever

US administration’s new tariffs on Chinese imports to the US officially came into effect today, 6 July 2018. Beijing responded the same day  by imposing tariffs worth of similar value on US exports to China. A trade war between Washington and China will hurt African economies, but it can also be an opportunity for African agricultural producers to position themselves in the Chinese market.

The Trump administration announced in early 2018  that it was going to impose 25% tariffs on over 800 Chinese goods imported to the US. After high level negotiations between both countries to reduce US trade deficit with China failed, US Commerce Department published a list of goods worth over $34 billion to be targeted by US tariffs from early July.

China is US largest trading partner with over $506 billion worth of trade between both countries. Trump has accused China of taking advantage of US ‘liberal trade policies’. The New York Times reported that Mr. Trump’s aggressive stance toward China is aimed at pressuring China to curtail what the White House describes as a pattern of unfair trade practices and theft of American intellectual property. US trade deficit with China grew from $347 billion in 2016, to $375 billion in 2017.

 

“In addition to the tariffs, the White House is placing restrictions on investment and on visas for Chinese nationals. The administration says the trade barriers are being used as leverage to force Beijing to make changes, including opening its markets to American companies and ending its practice of requiring firms operating in China to hand over valuable technology” the paper added.

Trump has promised to imposed more tariff on China, if Beijing fails to back down. He said aboard Air Force One that “the first wave of tariffs on $34 billion in goods would quickly be followed by levies on another $16 billion of Chinese products.” And Mr. Trump continued to threaten Beijing with escalating tariffs on as much as $450 billion worth of Chinese goods.

China has retaliated to the news of the new tariffs by imposing tariffs on US goods worth $34 billion and promising to respond to any further US tariff tit for tat.  Beijing has also accused US of bullying China and using trade to undermine China’s interest. “China is forced to strike back to safeguard core national interests and the interests of its people,” the Commerce Ministry said in a statement on Friday.

Increase in tariff between US and China is likely to hurt Chinese and US consumers and businesses. More importantly, these recent escalations are also likely to damage most African economies, including Cameroon’s.

China is Africa’s largest trade partner. Over $214 billion worth of goods and services were exchanged between China and Africa in 2017. In addition, growing demand for natural resources in China has fueled economic growth in most resource dependent African countries. As such, any slowdown in China’s economy will likely lead to falls in Chinese demand for African products and less Chinese investment in Africa.

Besides, a trade war between US and China is likely to have ripple effects on US and European economies which are also key trade and investment partners with most African countries. African economies may find it difficult to achieve trade and investment targets in a struggling global economy, with little or no investment from China, US and Europe.

The impact of any trade conflict between US and China may be harmful to African economies, but it can also be an opportunity for China and Africa to deepened economic ties between China and Africa and enable Africa to diversify its export to China.

While African economies can not replace US manufactured goods to China, demand for Africa’s textile and agriculture products can also increase in light of Chinese tariffs on US agricultural products. For example, African countries can take advantage of Chinese tariffs on dried fruits imported from US goods. (See List of Goods targeted by China).