Donald Trump’s tariffs and challenge to Nigeria’s resilience

There is little doubt that President Donald Trump’s second coming and his radical ideas will significantly impact global economies, and many dependent countries like Nigeria should prepare. Barring curtailment efforts by the Republican-dominated U.S. Senate on the grounds of propriety and moderation or retaliatory pushbacks by other countries to diffuse obnoxious tariff regimes, the months ahead will be riddled with trade wars and spikes in inflationary trends with devastating effects on many struggling economies and currencies. But from the Nigerian perspective, the real problem is more within than with a fiery hawk flexing its merciless muscles, and so, should be the respectable solution of clearheaded leadership.

After a temporary freeze on global health support programmes, President Trump announced the start of a process to impose reciprocal tariffs on U.S. trading partners worldwide, which could go into effect by April. Trump tasked top economic officials to design a plan for the United States to match higher tariffs imposed by other countries on U.S. goods, along with non-tariff barriers and taxes such as value-added taxes. Experts reckon that the action is not mere negotiating posture—the Trump administration is putting nearly every country on notice.

The president’s announcement of a “Fair and Reciprocal Trade Plan” appears to be a blueprint for a monumental restructuring of the international trading system controlled by the World Trade Organisation (WTO). It seems to initiate a process that could lead to new bespoke tariff schedules for some of the major trading partners of the United States, namely those that are viewed as the worst offenders in having high tariffs and running large trade surpluses with the United States. The president argued, without facts, that other countries often have higher tariffs on imports from the U.S. than the other way around and believes America “has been treated unfairly by trading partners, both friend and foe”.

Earlier, Mr. Trump announced tariffs on Canada, Mexico, and China—the United States’ three largest trading partners. The tariffs, 25 per cent on Canada and Mexico and 10 per cent (down from 60 per cent earlier threatened) on China, were issued based on Trump’s declaration of a national emergency over drug trafficking and illegal migration. The average tariff rate on all imports would triple from almost 2.5 per cent to more than 7.0 per cent if threatened tariffs on China, Mexico, and Canada are imposed. The average import rate would climb to a more than 50-year high.

An estimate has it that the proposed tariffs on Canada and Mexico would reduce long-run GDP by 0.3 per cent, the imposed tariffs on China by 0.1 per cent, and the proposed expansion of steel and aluminium tariffs by less than 0.05 per cent—not accounting for foreign retaliation. The first Trump administration imposed tariffs on thousands of products valued at approximately $380 billion in 2018 and 2019, amounting to one of the largest tax increases in decades.

While the workings of the tariff policy and its complexity are still being debated, it is clear that Trump is stoking a trade war of proportional collateral damages. Already, China has announced retaliation on about $21.2 billion worth of U.S. exports to take effect on February 10. Certain U.S. exports of coal and liquefied natural gas (totalling $2.6 billion in 2023) will face a 15 per cent tariff, while exports of oil, agricultural machinery, and large motor vehicles (totalling $18.5 billion in 2023) will face a 10 per cent tariff.

Economists generally agree that free trade increases economic output and income, while trade barriers reduce economic output and income. Historical evidence shows tariffs raise prices and reduce available goods and services for U.S. businesses and consumers, resulting in lower income, reduced employment, and lower economic output – with spiral effects on Nigeria, which has decades of economic ties with China and the U.S. In 2024, the U.S. was Nigeria’s fourth-largest trading partner after China, India, and Belgium. Most of the goods Nigeria imported from the U.S. in that same year included machinery, vehicles, mineral fuels, and cereals. Nigeria has also run trade deficits lately. Data from the U.S. Census Bureau reveals a persistent trade deficit in 2022, 2023, and 2024, due to Nigeria’s reliance on the U.S. for imports. Given that most imported Nigerian goods are shipped from the U.S. or China, Nigerians will face the ripple effects of cost increase.

Nigeria’s bid is also not helped by the fact the U.S. dollar may appreciate in response to tariffs, offsetting the potential price increase for U.S. consumers. The more valuable dollar, however, would make it more difficult for exporters to sell their goods on the global market, resulting in lower revenues for exporters. This would also result in additional pressure on weak currencies, especially on Nigeria’s naira, which has depreciated against the U.S. dollar, making imports more expensive.

In 2024, the naira lost 82 per cent of its value. Expensive goods like cars abroad will mean even more expensive costs in Nigeria from higher tariffs and levies paid on imported goods from Nigeria’s ports.

Barring the commonsense protection of the world trade order rather than the disruptive ‘protectionism’ of the American interest akin to isolationism, the days ahead will be tough. Countries like Nigeria must find ways to mitigate the effects. What are the local substitutes for motor spirits, gas oil, wheat, sugar cane, used vehicles, and others from abroad? No amount of copying and pasting proposals of World Bank technocrats will substitute self-dependence. It is bad enough that Nigeria has for too long been more dependent on the U.S., China, and the rest than leveraging its export potential.

Truly, there is no alternative to manufacturing and mass industrialisation that ride on automation and a friendly environment with access to affordable energy supply, security and the government’s patronage cum protection of local businesses. Instead of going fetish government jobs or small enterprises, Nigeria needs more risk-taking tycoons. The country needs more infrastructure, from ports to power, more free-wheeling competition and vastly better schools.

Officials must cut wastage, corruption and squandermania on foreign trips that add no value to the local economy. Development thinking must alleviate unemployment, poverty and human misery, not government officials steadily manipulating the numbers as if a faulty calculator causes our existential reality. The road to salvation is long and bound to be rough. However, genuine leadership will point fewer accusing fingers at others and focus more on problem-solving to build a legacy that lasts Trump’s four years and beyond.