There is a saying that when two elephants fight, it is the grass that suffers. But must that always be the case?
African nations have often borne the brunt of global trade wars, largely due to their reliance on raw material exports, which are vulnerable to price swings and supply chain disruptions.
However, the escalating trade dispute between the United States and the European Union presents not just risks but also opportunities that demand agility, strategic positioning, and bold economic diplomacy.
How the trade war escalated
The latest dispute erupted after Washington imposed a 25 percent tariff on all imported cars, dealing a blow to Germany’s auto industry and other European nations.
In response, Brussels, the de facto capital of the European Union has threatened retaliation, targeting €26 billion worth of U.S. goods, with plans to escalate measures against U.S. service exports, including tech giants like Google and Amazon.
The battle is intensifying, and with the White House now considering a further 20 percent tariff on key European exports, the rift is widening. For Africa, this presents a unique opportunity to reposition its trade alliances and economic strategies.
Africa’s position: a passive spectator or an active player?
Historically, Africa has often stayed on the sidelines during global trade conflicts, not getting directly involved or taking a strong position.
The continent’s economies are largely dependent on both Western powers, with the EU accounting for 31 percent of Africa’s total trade, according to the African Economic Outlook 2023, and the US accounting for about 5 percent, based on data from the World Trade Organization (WTO).
However, Africa has typically suffered more from these disputes than it has gained.
How Africa loses in global trade wars
Africa’s heavy reliance on raw materials like oil, minerals, and agricultural commodities makes it highly vulnerable to global trade disruptions.
Over 75 percent of African exports are commodities, leaving the continent exposed to price fluctuations, as was evident during the US-China trade war between 2018 and 2020.
This conflict caused a slowdown in global demand, leading to lower prices for key African exports such as oil, cocoa, and coffee. Nigeria, for example, which depends on oil for 90 percent of its export earnings, suffered greatly from the price slump.
Similarly, agricultural economies like Ivory Coast and Ghana, major cocoa producers, saw cocoa prices fall by over 10 percent, putting millions of farmers at risk.
These disruptions emphasize Africa’s challenges as trade wars undermine global supply chains, further hampering its manufacturing sector, which accounts for less than 2 percent of global output.
Unlike countries like Vietnam, Africa lacks the industrial capacity to benefit from shifts in global trade flows.
Additionally, trade wars often result in declines in foreign direct investment (FDI). In 2019, African FDI dropped by 16 percent, with investments being redirected to Southeast Asia.
The ongoing US-EU dispute over intellectual property rights could similarly deter investment in Africa’s growing tech sector, impacting digital infrastructure development.
Finally, the economic impact of these trade disruptions is felt in rising unemployment. The African Development Bank estimates that between 2018 and 2020, trade wars cost the continent over 4 million jobs, especially in export-driven industries like textiles and mining.
Can Africa Take Advantage of the US-EU Trade Dispute?
While Africa has typically been hurt by trade conflicts, the current US-EU dispute may present new opportunities, according to experts.
Finding new markets for exports
With the US and EU imposing tariffs on each other’s products, Africa has the chance to step in and fill the void. Agricultural exports like cocoa, coffee, and processed foods could find new buyers in Europe, which is now seeking alternatives to US suppliers.
Additionally, as the US reduces its imports from Europe, African raw materials could gain more value provided the right policies are implemented.
Building stronger trade within Africa
The African Continental Free Trade Area (AfCFTA), launched in 2021, has yet to be fully utilized. This trade dispute could push African nations to strengthen internal trade and collaboration.
Currently, only 17 percent of the goods traded within Africa are locally produced, leaving significant room for growth. AfCFTA could help reduce dependence on global markets and enhance regional self-sufficiency.
This trade dispute could push African nations to strengthen internal trade and collaboration. Idris Oyekan, a capital market analyst, sees this as a pivotal moment for Africa’s economic repositioning.
‘African nations have a rare moment to reposition their economies. The U.S. and EU are looking for alternatives, and if Africa presents itself as a stable and investment-friendly region, it could attract significant capital inflows.
But this requires clear trade policies and stronger institutions to ensure investor confidence.’
Getting better deals in trade talks
As the US and EU seek new trade partners, African countries must negotiate from a position of strength.
They can push for better terms under agreements like the African Growth and Opportunity Act (AGOA) and demand long-term investments in key industries, such as technology and infrastructure.
Can Africa win?
Winning in a trade war doesn’t mean choosing a side it’s about using diplomatic leverage to secure favorable outcomes. The current US-EU dispute offers Africa a unique chance to redefine its trade relations.
The real question is not whether Africa will be affected, but whether it will seize this moment to enhance its position in the global trade arena.
