Introduction
The recent trade centric manoeuvres by the new United
States of America (US) administration have unleashed shock waves in
international trade. Many countries are fearing that the actioned and impending
US foreign trade policy measures will affect theirs and the entire world’s
economy. The media has been buzzing with
orders, policy pronouncements and announcements by the new US administration
led by President Donald Trump. President Trump was sown into office on 20
January, 2025. He signed a flurry of executive orders soon after the
inauguration ceremony. He has followed up with more and made several statements
regarding trade tariffs. These US trade policy
shifts have affected regional, continental and international trade. As the
saying goes, when America sneezes the world catches a cold. This has unleashed
a series of tariff announcements and counter retaliatory rhetoric. A tariff is
a domestic tax levied on a good as it enters from abroad. It is proportional to
the declared value of the imported good.
Canada and Mexico, US’s neighbours on the northern and
southern borders, respectively, were the first nations to taste these trade
policy shifts. The US slapped a 25% import tariff on selected Canadian and
Mexican goods on 4 February, 2025 but this was suspended for a month, a few
days later (British Broadcasting Corporation(BBC) News, 2025). The suspensions
came after the two countries’ complied with US demands for more border guards
to be deployed on their respective borders with the US. A 10% tax was also
levied on Chinese imports. China responded with counter levies on selected US
exports to China. These counter tariffs came into force on 10 February 2025. Mexico,
Canada and China are the US’s biggest trading partners. They accounted for 40%
of imports into the US in 2024, according to BBC News (based on information
compiled from the US Census Bureau).
So the question is, is this the start of a regional
trade war between the US and its neighbours and a global trade war between the
US and China? Is the “America First” agenda synonymous with a pull away from
regional trade integration and a push back at globalisation? Are the days of
free movement of people, goods and services around the global slowly coming to
an end? Should we brace ourselves for more trade restrictions and trade wars?
Regional and continental trade integration pull away
Global trade policy trends have historically skewed
towards greater geopolitical regional and continental integration. Removal of
tariff and non-tariff barriers, such as free movement of people, goods and
services, and single currencies, are key indicators of trade integration. The
North American Free Trade Agreement and the Free Trade Area of the Americas are
examples of the free trade agreements that the US, Mexico and Canada have
interacted with.
This decade has witnessed a growing trend of state
trade policy reversals and withdrawals. Brexit (short for British exit from the
European Union (EU)) is historical and memorable. The United Kingdom (UK) was
the first country to leave the EU since its establishment. The process started
in 2016 with a referendum. The final withdrawal took place on 31 January 2020.
The UK and the EU finalised a new trade deal on 24 December 2020.
Anti-immigration sentiment, post 2015, was one of the
key drivers of Brexit (Britannica, 2025). The BBC reported that US tariffs on
Canada and Mexico have been motivated by President Donald Trump’s concerns on
illegal immigration and drug trafficking on the Canadian and Mexican borders,
leading to illegal entry of prohibited drugs into the US market. But, there is
no doubt that introduction of these tariffs is also linked to trade. The US is
the world’s largest economy and obviously is interested in keeping the status
quo. The World Trade Organisation (WTO) identify tariffs as a preferred and
transparent means of protection (Koo and Kennedy, 2005). The WTO has received
and circulated to members China’s request for a dispute consultation with the
US regarding the new tariff measures (WTO, 2025).
Current globalisation era, is China the big winner?
There is no doubt that globalisation and the
technological advancement spurred by the internet has made the world a global
village as was envisaged by many. The world economy has been dramatically and
significantly transformed by the recent era of globalisation. The first era of
globalisation took place in the nineteenth and early twentieth centuries,
between 1813 and 1914. Financial integration, flows of people between
continents, improved transportation, communication and reduced government trade
controls and restrictions led to unprecedented rates of world trade (Rodrik,
2011).
There is no doubt that some countries have reaped and
benefitted enormously from the ability to produce goods in large quantities, at
low cost, and to export them to offshore customers, all over the world. China,
with the world’s largest population, and cheap labour, has been a big winner in
this regard. The country has leveraged financial globalisation (the daily
exchange of currencies, securities, derivatives, and other financial assets
exchanged globally) by lending to rich nations (ibid.). The current globalisation era has seen China
overtake Japan as the world’s second largest economy (Moyo, 2011).
Of course, there are many who see globalisation as a
loss for their domestic economy, especially when it comes to the manufacturing
sector. Nationalists are among the loudest and influential voices among those
who claim that China has unfair advantage. The argument is that small businesses, and
even big corporations, are unable to compete on price when it comes to Chinese
manufactured imports. This has resulted in business losses, closures, and the
other knock-on effects on the domestic economy. The loss of domestic jobs to
overseas labourers for example, is a major political issue.
What can Africa, a newcomer to continental free trade
area agreements, learn?
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Imported Hair food on sale in Zambia |
Elsewhere, in Africa, the African Continental Free Trade
Area started trading on 1 January 2021. It is the largest free trade area in
the world. What can Africa learn from these trending issues in international
trade? I think one of the key sticking points, to pay attention to, is the
cross border labour immigration. Migration of skilled and unskilled labour
leads to oversupply of labour in some sectors (unless there are work permit
prohibitions for immigrants or quota systems) in the receiving country. This
results in many people chasing a few jobs. Resentment and anti-immigration and
nationalist views and narratives abound (we saw this trigger xenophobic attacks
in South Africa, when political instability and high poverty levels in
neighbouring Southern Africa Countries, drove many to seek employment
opportunities there). There are no easy answers to these challenges especially
when the humanitarian imperatives require us to open our borders to people fleeing
from various atrocities in their native countries. However, it is important to
anticipate mass labour migration and plan for it better, in regional,
continental and global trade integration agreements.
Conclusion
There is no doubt that nationalist ideologies are
growing and increasing, globally. This is in part driven by scepticism (for
example, Euroscepticism in Europe) and frustration with global, continental and
regional trade integration instruments and agreements. The key issue is that
some have enabled free movement of people, goods and services. Will the push
back by nationalists succeed in halting the trajectory of globalisation and
free markets? Only time will tell. Will
protectionist policies gain ground and spread? What is important is that policy
and decision makers pay close attention to the balance and tensions between
domestic and foreign trade dimensions. International trade still remains one of
the biggest opportunities for national, regional and global economic growth and
poverty reduction.
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Memorial Park in Zambia |
What China has demonstrated over the past half century is
that strategic engagement in multiple geospatial markets leads to sustained
domestic economic growth and poverty reduction. China has been able to win in
the current globalisation era because it has cast the net wide and is present
everywhere including in several developing markets in Africa and the pacific
island nations. This is truly ironical given that China’s outlook was
inherently internal and introspective for centuries (Moyo, 2011:16).
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