Trump’s tariff war on China prompts African anxiety

At the start of April, President Trump declared “Liberation Day” for American business, unveiling a broad suite of tariffs against practically every country around the world. This followed similar – if less comprehensive – moves during Trump’s first administration, as well as pledges during the election in which he referred to tariffs as “the most beautiful word in the dictionary”.

Trump sees tariffs as a crucial way of rebalancing America’s chronic trade deficit and forcing manufacturers to produce goods and employ workers in the US. “Liberation Day” had almost an immediate impact on sentiment in financial markets as the president sought to reshape the entire makeup of global trade. The VIX index, which measures risk levels and volatility on stock markets, spiked by more than 110% in the aftermath of the announcements.

Beyond considering how to respond to the tariffs directly imposed on them, of particular concern to African countries was the escalation in US-China trade tensions. A trade war between Washington, the world’s largest economy, and Beijing, the world’s second largest economy and largest trading partner for almost every African country, potentially has significant implications for the continent’s economy and growth prospects.

“Liberation Day” saw Trump impose an additional 50% tariff on Chinese imports, raising total tariffs on some goods to over 100%. China responded by announcing an additional 34% tariff on US goods and imposing export controls on rare earth minerals.

A series of further retaliations and counter-retaliations eventually saw the US impose tariffs of 145% on most Chinese goods, with Beijing implementing a slightly lower rate of 125%.

In May the two sides agreed that, to de-escalate tensions, the US would lower tariffs to 30% and China to 10%, while they negotiate further. The precarious nature of this deal has African leaders and global policymakers on edge.

As Daniel Silke, a political economy analyst based in Cape Town, tells African Business: “the on-off tariff threats have unleashed uncertainty in markets across the world.

“It is an old cliché, but it remains correct: markets do not like uncertainty, whether in the major capitals of the world, or in developing countries.”

An influx of cheap Chinese goods?

The trade tensions between the US and China are likely to have ramifications on the African continent, whose economies and businesses are particularly exposed to developments affecting Beijing.

The drop in trade between the world’s two largest economies is likely to be staggering: the World Trade Organization (WTO) projects an 80% decline in US-China merchandise trade this year alone. The International Monetary Fund (IMF) has previously warned that Sub-Saharan Africa could be the worst impacted by “geoeconomic fragmentation” between East and West.

Perhaps the most direct potential impact is on the likely increase in Chinese goods exports to Africa, in light of the drop in trade with the US.

Felistus Kandia, a researcher in trade and development at the Mashariki Research and Policy Centre in Nairobi, tells African Business that “it is likely that Chinese companies will increasingly turn to African markets as they face tightening restrictions and tariffs from the United States.”

“With their access to western markets becoming more constrained, Africa offers both a strategic alternative and a growing consumer base,” she adds. “China has already positioned itself as the dominant trade and investment partner across the continent, and the current trade tensions may accelerate this shift. This development presents both opportunities and challenges. On the one hand, the increased availability of affordable Chinese products could benefit consumers and help reduce the cost of doing business,” Kandia notes.

“On the other hand, the influx of Chinese goods risks overwhelming Africa’s fragile domestic industries – many local manufacturers already struggle to compete with low-cost imports.”

Less Chinese finance for Africa

Furthermore, the ongoing trade tensions between the US and China are likely to be reflected in weaker growth in Beijing – and indeed globally. The IMF has revised down its projections for Chinese growth in 2025 to 4% in light of the trade tensions and China’s own domestic challenges in its economically vital real estate sector.

The global investment bank UBS recently revised its projection for Chinese growth from 3.4% upwards to between 3.7% and 4%, in light of the apparent détente this month. This is still, however, significantly below most pre-“Liberation Day” forecasts. Goldman Sachs is more optimistic that the tariff rollbacks will boost economic activity in China and sees its 2025 growth at around 4.6%.

Kandia notes that an environment of slower growth in China would “inevitably ripple across Africa,” and suspects that “one of the most immediate impacts will likely be a decline in Chinese financing for infrastructure.”

Chinese lending to Africa has been in decline for several years. It peaked at a total of $28bn in loans in 2016; the pandemic era of rock-bottom growth saw this plummet to less than a billion in 2022.

While Beijing has since increased its financing commitments on the continent – with Chinese lenders committing approximately $4.61bn in 2023 according to the Boston University Global Development Policy Center – a more fractured global trading environment and slower growth in China are likely to limit its ability or willingness to extend further loans to Africa.

Kandia says that “as China adjusts to internal economic pressures, including high debt levels, demographic shifts, and a sluggish real estate sector, its outward investments are becoming more cautious and strategic. This could translate into fewer large-scale infrastructure deals, delays in project implementation, or stricter loan conditions for African governments,” she explains. “For countries that have relied heavily on Chinese funding to drive their development plans, this presents a serious vulnerability.”

Commodities brace for slowdown

Kandia also notes that slower Chinese growth is likely to reduce demand for African raw materials. Although prices have now rebounded, “Liberation Day” saw almost 20% wiped off the value of copper futures, for example, potentially reflecting market fears of weaker demand from a country which represents almost 30% of total global manufacturing output.

“China is a major consumer of commodities such as copper, iron ore, oil, and timber. If industrial production and construction slows in China, commodity prices could fall, hurting African exporters and widening fiscal deficits in resource-dependent economies,” Kandia tells African Business. “This, in turn, may limit the ability of governments to service debt, invest in social infrastructure, or stimulate domestic industries. Falling prices also mean reduced foreign exchange earnings and tighter fiscal space for governments that are already struggling with debt.” The increasing political and economic tensions between Washington DC and Beijing could also have geopolitical implications in Africa. Silke is concerned that the political fallout “really places African countries in a very awkward position”.

Time to pick sides?

“Some will feel as though they can deal more satisfactorily with Washington, some will feel as though they want to move closer to China,” he says.

Silke fears that this could undermine initiatives such as the African Continental Free Trade Area (AfCFTA), which is designed to harmonise trading regulations and promote intra-African trade.

By pushing some African countries closer towards China, and some closer towards the US, Silke says “this could break the idea of the more united trading bloc that Africa can and probably should become.”

Kandia is more optimistic that Africa can balance its engagement with both sides and avoid being drawn into these political tensions, although she does note that “African countries may increasingly face pressure, whether direct or indirect, to choose sides.”

“Africa needs Chinese capital and American innovation, eastern infrastructure and western market success,” Kandia tells African Business. “Choosing one at the expense of the other would narrow the continent’s development options at a time when it needs wider partnerships to meet its industrial and social goals. Instead of taking sides, Africa should take a stand – a stand for principled non-alignment.”

It remains to be seen how far the trade war between the US and China will go – or whether, with the recent climb-down from both sides, the most dramatic moves have already been made.

Kandia emphasises, however, that Africa needs to respond “proactively” to these economic and geopolitical risks, by “engaging strategically with alternative partners such as Japan, the European Union, and the Gulf states, both to help cushion the continent from external shocks and to rebalance its global trade relationships.

“Both governments and businesses must embrace scenario planning and strategic foresight,” she says. “The global landscape is increasingly volatile and those who anticipate change and adapt early will be better positioned to thrive.

“Whether through early warning systems, public-private dialogues, or long-term industrial policy, the goal should be to move from reactive to anticipatory thinking.”