The tariff and imminent trade war orchestrated by US President Donald Trump against Canada, China and Mexico may heighten imported inflation for Nigeria and some African countries.
Economic and financial experts say Trump’s action could also cause a fall in the price of crude oil.
Trump had on Saturday signed an executive order, imposing new tariffs, including a 25 percent duty on all imports from Mexico and most products from Canada, along with a 10 percent tariff on goods imported from China.
According to the Trump administration, the tariffs are aimed at curbing the flow of drugs and undocumented immigrants into the US. President Donald Trump said on Sunday that the sweeping tariffs he imposed on Mexico, Canada and China may cause “some pain” for Americans.
In swift response, Mexican President Claudia Sheinbaum announced retaliatory tariffs, while Canadian Prime Minister Justin Trudeau introduced “far-reaching” levies targeting American goods.
Meanwhile, the Chinese government said it would be filing a formal complaint to the World Trade Organisation (WTO) against the U.S. over President Trump’s decision to impose new tariffs on imports.
China’s ministry of commerce promised to take necessary countermeasures to safeguard its interests.
“The unilateral tariff hikes by the US seriously violate World Trade Organisation rules,” the ministry said.
While experts see opportunities for countries with manufacturing capabilities to explore the trade war to their advantage, they doubted the capacity of Nigeria to exploit opportunities from the trade war, since the country is not a producing economy but import-dependent.
In a telephone interview with LEADERSHIP yesterday, the chief executive of Centre for Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the tariff slammed on countries such as Canada, China and Mexico may lead to heightened imported inflation for Nigeria.
According to him, despite the tariff being a bilateral issue, it will disrupt global trade which will have implications for the global economy in the long run because of the size of the economies involved.
For Nigeria, he noted that the tariff will spark inflation in the U.S., affecting the price of imported goods from the country into Nigeria.
“Secondly, if there is inflation in the U.S. which is more likely to happen, the U.S. Fed is likely to raise interest rates, and when they do this, Nigeria will have issues with foreign portfolio investments (FPIs).
“So there is the issue of the inflationary effect transmitted to us by way of effect on our FPIs. There is also the issue of inflationary effect arising from our import from the U.S. which we do not have much alternative for,” he said.
Yusuf pointed out that the trade war may depress the global economy, and lead to the development of new trade partnership, adding that manufacturing countries that are not slammed with the tariffs would be better for it.
Professor Michael Obadan, a former Monetary Policy Committee (MPC) member noted that Nigeria’s level of exports had become quite inconsequential that the country may not be able to tap into the opportunities present in the trade war. Expressing pessimism about Nigeria’s readiness to exploit any opportunity, he said, “One will expect that if America is reducing its volume of trade with the countries affected in the tariff war, it may want to import from other countries that have not been imposed with such tariffs.
“If Nigeria were a manufacturing country and we had the capacity to manufacture and the goods are similar to the ones tariffed, it would have been an opportunity for Nigeria to increase its volume of exports and earn more foreign exchange.”
He noted that Nigeria’s economic environment was hostile to manufacturing because of the reform policies implemented in the last few years.
“Many manufacturing companies have departed the country, particularly the foreign ones, and those in the country are just struggling to produce. They are producing goods at very, very high costs because the operating environment is very hostile, and such goods are not competitive, even within the country, not to talk of abroad.
“Nigeria is not in a good position to take advantage of any trade opportunity that might be tariff war initiated by America. Nigeria is a bad shape at the moment in the area of production, particularly production of manufactured goods and agricultural goods. Trade war involves manufactured goods, mostly, maybe some extent, agricultural goods,” he said.
For his part, the chief executive of Economic Associates, Dr. Ayo Teriba, sees the potential threat of disruption by President Donald Trump as empty and only temporary at best.
He noted that the world had changed and countries were better prepared to absorb the shocks of tariffs and other trade restrictions.
According to him, the USA is just a country of 350 million people against the likes of China and India, and other countries that constitute the BRICS nations.
He also said the USA did not belong to any economic bloc, yet Trump was threatening countries that belong to BRICS, made up of billions in population, noting that if these countries were to retaliate, it would be the American economy that would suffer the most.
“If you restrict their sales to your country they will end up restricting your own sales to more than two billion people. Who is going to lose more? When it comes to trade war, I think America is more vulnerable than Trump is imagining.
“I see what Trump is doing as empty threat; after about three months from now, the reality will begin to dawn on him,” he said.
A frontrunner for the prime ministerial position in Canada, former Finance Minister Chrystia Freeland, in an interview with the CNN’s Global Public Square presenter, Fareed Zakaria, yesterday stated that by slamming trade restrictions on Canada, the USA was shooting itself in the leg as it depends on Canada for a huge chunk of its trade.
A development economist at Adeleke University, Professor Tayo Bello, believes the ongoing trade tensions should serve as a wake-up call for Nigeria to intensify its backward integration efforts.
“Trump is enforcing backward integration in America to protect jobs and industries. Nigeria should be doing the same. We have abundant agricultural land, yet we are net importers of food. We have vast crude oil reserves, yet we import refined petroleum products. The government must prioritise self-reliance and local production,” he said.
But chief executive of AntHill Concepts Ltd, Dr. Emeka Okengwu, insists that Nigeria must take advantage of this shift.
“Nobody holds absolute economic power anymore. Even though the U.S. is a dominant force, other economies are adjusting. The BRICS nations, for example, are strengthening their economic ties, and they are already some of the biggest buyers of Nigeria’s crude oil. We should leverage these relationships and move from just exporting raw materials to adding value through local refining and industrial processing,” he said.
A financial economist at Auchi Polytechnic, Zakari Mohammed, sees both risks and opportunities in Trump’s policies.
“A weaker naira could make Nigerian exports more competitive in international markets, but it also makes imports more expensive, increasing inflation. The key for Nigeria is to reduce its import dependency and build a self-sufficient economy. If we fail to do so, global economic disruptions like this will always leave us vulnerable,” he said.
On his part, chief executive of Cowry Assets Management Company, Mr Johnson Chukwu, noted that the tariffs would lead to an increase in the cost of goods and services, because countries are going to build barriers.
“The principle of competitive advantage will be jettisoned and this means everybody will try to produce everything, even when the costs of producing those things in their localities are higher.
“Donald Trump is pushing for improved oil production in the U.S. and he has also said he is going to disrupt the OPEC+ Alliance, and get Saudi Arabia to produce more. When that happens, we should expect crude prices to drop. And because Nigeria doesn’t have capacity to compensate for the drop in terms of increased production, our foreign exchange will slow down.
“Ordinarily, if you can compensate for a drop in price by increasing volume, you will not so much feel the impact but we are not in that position. So what that means is that Nigeria’s foreign exchange inflow will be negatively impacted.”
The director-general of National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Sola Obadimu said Nigeria needs to develop its trade policy that will favour and protect the nation as other nations are doing.
“Those in charge of our trade policy should bring out policy that will protect us,” he said.
The vice president of Highcap Securities Limited, Mr. David Adonri, said by the trade war and violent threats of acquisition of independent countries, the United States of America is dislocating the world’s socio-economic order.
“The tariffs war may eventually provoke global hyperinflation and perhaps lead to recession,” he stated.
Adonri further noted that there is the possibility of a precipitous fall in the price of crude oil amidst this battle, which may batter the Nigerian economy.
“The U.S. is pursuing a covert isolationist policy aimed at revitalising their domestic production capacity.
“The impact of the policy on Nigeria can be very devastating if it adversely affects diaspora remittances and crude oil price. The situation is deteriorating very fast and if Nigeria does not react proactively by domesticating the economy like the U.S. is doing, the consequences may be very dire.”
Opportunities for Nigeria and Other Exporting Nations
While the trade war between the U.S. and its partners presents economic challenges, analysts believe it could create new export opportunities for countries like Nigeria
Speaking with LEADERSHIP yesterday, economic sector analyst, Stephen Kanabe said as U.S. tariffs will make goods from China, Mexico, and Canada more expensive, Nigeria can position itself as an alternative supplier, especially in sectors like oil, agricultural products, and manufactured goods.
Companies looking to avoid tariffs may shift production to Nigeria or source raw materials from Nigerian industries, boosting local manufacturing and job creation.
“With disrupted trade flows, Nigerian products (such as crude oil, agricultural exports, and textiles) may become more attractive to U.S. buyers seeking cost-effective alternatives to goods from China, Mexico, and Canada,” he stated.
However, a former member of the Monetary Policy Committee, Professor Michael Obadan, said Nigeria’s level of exports had become quite inconsequential that the country may not be able to tap into the opportunities present in the trade war.
Expressing pessimism on Nigeria’s readiness to exploit any opportunity, he said, “One will expect that if America is reducing its volume of trade with the countries affected in the tariff war, it may want to import from other countries that have not been imposed with such tariffs.
“If Nigeria is a manufacturing country and we have the capacity to manufacture and the goods are similar to the ones tariffed, it would have been an opportunity for Nigeria to increase its volume of exports and earn more foreign exchange.
“Nigeria’s economic environment is hostile to manufacturing because of the reform policies implemented in the last few years. Many manufacturing companies have departed the country, particularly the foreign ones, and those in the country are just struggling to produce. They are producing goods at very, very high cost because the operating environment is very hostile, and such goods are not competitive, even within the country, not to talk of abroad.
“Nigeria is not in a good position to take advantage of any trade opportunity that might be tariff war initiated by America. Nigeria is in a bad shape at the moment in the area of production, particularly production of manufactured goods and agricultural goods. The Trade War involves manufactured goods, mostly, maybe to some extent, agricultural goods.”
Economic analyst Jimoh Solomon Sule suggests that the situation could lead to increased export demand for non-U.S. suppliers, and trade diversion as companies seek alternative sourcing options. Apart from that, he said more foreign direct investment (FDI) will go to countries with strong manufacturing bases.
“Nigeria’s competitiveness could improve as disruptions in global trade force buyers to look for alternative suppliers,” Sule explained.
Crude oil, one of Nigeria’s primary exports, could become a viable alternative for U.S. importers seeking to offset changes in their trade relationships.
Trump Receives Flak
A barrage of condemnations has rained down on United States President Donald Trump following his decision to impose stiff tariffs on imports from neighbouring countries, Mexico and Canada, as well as its largest supplier of goods, China.
According to analysts, Trump’s new tariffs could drive up the prices of everyday goods, from cars and sneakers to tequila and avocados.
Trade between North America and the U.S. hit $1.8 trillion in 2023—far surpassing the $643 billion with China. Trump’s new decision imposes a 10 percent tariff on all Chinese imports and 25 percent on those from Mexico and Canada, with a lower 10 percent rate on Canadian energy.
The U.S. imports billions in cars and parts from Canada and Mexico, with vehicles crossing borders multiple times during production. Experts warn a 25 percent tariff could add $3,000 to car prices.
Also, Canada, America’s largest crude oil supplier, ships billions in oil that U.S. refineries rely on. Tariffs could push gas prices up by 30-70 cents per gallon.
The U.S. imports billions in tequila, mezcal, and Canadian whisky. Retaliatory tariffs could further hurt the spirits industry, which already faces a 50% EU tariff on American whiskey. The U.S. buys $85 billion in farm goods from Canada and Mexico, including most imported fruits and vegetables. A 25% tariff would mean pricier groceries, including “guacamole tariffs” just before the Super Bowl.
Past tariff wars led to retaliatory measures on U.S. crops like soybeans and corn, forcing the government to compensate farmers. While Trump delivered aid before, many farmers prefer open markets over government checks.
