How US-China trade war may affect Nigeria’s economy

The United States of America and China are two key trading partners of Nigeria and a trade war between the two countries is largely to have ripple effects on Nigeria.

A trade war is looming between the true countries as both of them have recently escalated their threats of imposing new trade tariffs.

Recently, President Donald Trump of the United States announced that his administration would draft plans for tariffs worth $200billionn in Chinese imports if Beijing follows through on its threat to retaliate against US duties on imports announced not long.

The US does not want China to retaliate recent tariffs due to take effect in early July, which will affect Chinese goods worth $100 billion.

Speaking exclusively to Daily Trust on Sunday, Nigeria’s Chief Trade Negotiator, who is also the Director General of the Nigeria Office for Trade Negotiations (NOTN), Ambassador Chiedu Osakwe, said trade wars are harmful and they are destructive, not only for countries involved in the wars but for other countries.

Ambassador Osakwe said trade wars cause collateral trade and economic damage for other countries not involved in the war and the global economy in general.

“This is not what any one will like to see. This is not what any country will like to see and this is not what Nigeria will like to see,” he said.

The NOTN boss said Nigeria is committed to a negotiated and agreed rule-based global economy in which countries draw mutual benefits based on international cooperation.

He urged both the US and China to sit in a round table to negotiate their differences on the basis of the rules that govern global economy and seek mutual accommodation.

China and the US have both already imposed tariffs on steel, aluminium and some agricultural goods, heightening trade war tensions.

The Chief Executive Officer of Alem Clearing Limited, Dr Peter Mba, said Nigeria will be affected by the trade wars since Nigeria is heavily dependent on imports from China and the United States.

Mba, who is also an accountant and business man, said both countries are raising tarrifs on agricultural commodities, consumables and raw materials for industries and this means Nigeria will have to import these products from these countries at higher costs.

“US targeted China with increase in tarrif on aluminium but it is not only China that imports aluminium from US. Nigerian importers also import it,” he said.

He said the trade war may lead to increased inflation in prices of goods in Nigeria considering that Nigerians have high taste for foreign goods, mostly from China and the United States.

Trade war started brewing in on March 23, 2018, when the US imposed new tariffs on steel and aluminium with most of the largest steel exporters to the US exempted at least until May 1, but China is among the countries that are hit.

On April 2, 2018, China retaliated with new tariffs on 128 categories of products, including pork, fruit and nuts, steel pipe for the oil industry, and ethanol.

To exert trade protectionism, on April 3, 2018, the US administration announced a new list of 1,333 Chinese product categories that could face 25 per cent tariffs and on April 4, 2018 China announced its list of targets for possible retaliation, including key exports from the US such as soybeans and cars.

Rattled by the retaliation, President Trump issued a statement on April 5, 2018 saying that he had instructed the US trade representative to consider whether $100bn of additional tariffs would be appropriate and to identify which products should be affected.

On April 17, 2018, China announce a 178.6 per cent import tariff on sorghum, of which it imported more than $800 million from the US in 2017 and on June 15, 2018 President Trump imposed tariffs on about $50 billion worth of imports from China as justification for alleged Beijing’s longstanding theft of US companies’ intellectual property.

On June 16, 2018, China announced it would begin imposing its own 25 per cent tariffs on 545 categories of US products worth $34bn including soyabeans, beef, whiskey and offroad

The Chief Executive Officer of Alem Clearing Limited, Dr Peter Mba, said Nigeria will be affected by the trade wars since Nigeria is heavily dependent on imports from China and the United States.

vehicles on July 6.

It also threatened to add a further $16bn later, targeting US energy exports such as coal and crude oil and on June 18, 2018, President Trump ordered his administration officials to draft plans for tariffs on a further $200 billion in Chinese imports if Beijing does not abandon its intention to retaliate against US duties on imports announced last week.

An economist, Michael Izunacho, told the Daily Trust on Sunday that as both countries increasingly impose new tariffs on their import commodities, exporters from the two countries will begin to think farther away from the affected countries.

Izunacho said exporters from both China and the US will look for alternative markets and Nigeria, with a population nearing 200 million people, is a perfect destination for such exports.

Data sourced from the National Bureau of Statistics (NBS) show that 21 per cent of Nigeria’s total imports came from China and 7 per cent from US as at the end of the first quarter of 2018.

“You saw the demand President Trump made to President Buhari the last time he visited the US. Trump wants US farmers to export raw agricultural commodities to Nigeria. That was Trump looking for an alternative export destination for US goods and China shuts its doors with tariffs,” he said.

U.S. total exports of agricultural products to Nigeria totalled $370 million in 2016, with wheat accounting for $265 million, corn amounting to $26 million, prepared food amounting to $23 million, condiments and sauces totalling $12 million and processed vegetables translating to $10 million.

The U.S. trade balance with Nigeria shifted from a goods trade surplus of $1.5 billion in 2015 to a goods trade deficit of $2.3 billion in 2016.

Izunacho said already China floods Nigeria with Chinese goods and its trade war with US will likely further worsen the situation.

Already, there exist trade imbalance between Nigeria and China largely due to the poor state of Nigeria’s manufacturing sector.

Data obtained from the NBS show that Nigeria had a trade deficit of about N6 trillion with China between 2013 and 2016.

Analysis showed that out of Nigeria’s total import bill of N29.91 trillion between 2013 and 2016, China accounted for N6.41 trillion.

This is a huge gap when compared with N714.97bn worth of goods Nigeria exported to China within the four-year period.

A subtraction of Nigeria’s exports from imports from China will show a trade deficit of N5.70tr, in favour of China.