By Aaron Efuribe
China And US Trade War: Impact Of The Heavyweight Showdown Between USA & China
The seemingly trade war between china and the US does not seem to have an end at least for now. This has divided opinion in the west whether the tariff increase that was first initiated by Donald Trump was justified. The series of tariff imposition by both countries has led to a feeling of fear amongst trading partners.
The truth is that the US has accused China for many years of Intellectual property theft and sharp trade practices. The American feels that this scenario has been going unchecked for many years and that has contributed to China being the economic powerhouse they are today.
China has risen from an obscure country in the last 30 years to emerge as the second most economic superpower. Though growing concern by Americans on the impact of the trade war has been on the burning agenda in the last few days, however my concern is, how does this 2 elephant fighting affect us in Africa?
China is the largest trading partner in Africa. The trade is worth over $300b and the investments in Africa seem to be on the rise on a yearly basis. Imposition of tariffs on China imported raw material or semi finished goods from America will lead to high cost of production by Chinese firms. As a result of high cost of production incurred by Chinese firms, they will want to recoup the cost or additional cost incurred as a result of the high tariff imposed upon them by American companies.
The Chinese companies that export the goods within the category will increase the prices for such goods. The Implication is that most African importers will pay more for goods from Chinese firms. The additional cost on the African importer will be transferred to consumers in Africa who will pay more for Goods imported by Chinese importers.
The additional prices of good might reduce the disposable income of the African consumers who are struggling with harsh economic policies.
According to an old Chinese saying from The Art of War by Sun Tzu goes as “killing 10,000 of enemies and sacrificing 3,000 of own soldiers”, implying the winning of this war is not worth the while. From my point of view, the losses caused by the trade war would far outweigh the gains and this has led to many respected public figures to voice out their concern.
The IMF president and the Governor of the Bank of England vehemently voice out their concern; the Trump administration will not win in any sense.
A trade war in today’s world is not even a zero-sum game but a lose-lose situation with no winners – just a loser and a bigger loser.