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Around the World

US-China Trade War: Implications for Nigeria as its Asian romance lingers

Recently, the world has witnessed major events ranging from populism, the Brexit process, and of course the escalating US-China Trade War.

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U.S-China Trade War

The roller coaster of events that have characterised the global political scene since last year have been quite interesting. The world has witnessed major episodes ranging from failed efforts to denuclearise the Korean Peninsula, to populism, the Brexit process, and of course the escalating US-China Trade War.

Without a doubt, the United States of America and China are two of the largest economies in the world. They are both operating at the heart of global industrial supply chain. However, these two economies have lurked horn in an on-going trade war which has seen both of them try to undermine the economic prowess of each other.

What is a Trade War?

Basically, Trade Wars are subsumed in the concept of protectionism, where tariffs are levied on imports. Tariffs, in theory, make a locally made products cheaper than imported ones; thereby encouraging consumers to buy home-made products.

Trumponomics: How the U.S-China trade war began in retrospect

The on-going trade war between the U.S and China began in March 2018, when the United State’s President, Donald Trump, announced general tariffs of 25% on imported steel and 10% on imported aluminium.

According to Trump, the decision to impose such a general tariff was to help reduce the US’s trade deficit from China, which has been described as detrimental to the US steel and aluminium industries. It was also revealed that more than 90% of the 5.5 million tonnes of aluminium used in the United States is imported.

However, The New York Times reported that China is not among the top 10 suppliers (of either steel or aluminium) of U.S. imports. Instead, Canadian aluminium made up more than half of America’s imports in 2016. Also, Canada boasts of the largest share of America’s steel import of 17%. The U.S. Department of Defence also pointed out that most U.S. imports are produced by U.S. allies, including South Korea, and Turkey, which would be hurt by broad tariffs.

It is intrusive to note that one of the hallmarks of the Trump administration since he assumed office, is his concern about China’s trade practices.

Beyond steel, China is the US largest supplier of imported goods

As at 2017, the U.S. exports to China amounted to approximately $185 billion. On the other, China constituted U.S. largest supplier of imported goods worth more than $500 billion in the same year.

Also note that China is the biggest trading partner for some of the Africa’s most significant economies, including Nigeria, South Africa, and Ethiopia. So, whilst Africa comprises a mere 2% of global trade, US-China trade tension is of direct relevance to the continent.

Despite over $250 billion worth of tariff on Chinese goods, Trump threatens more

Data from the US census bureau shows that the US has imposed three rounds of tariffs on Chinese goods, totalling more than $250 billion.

Despite the $250 billion on Chinese goods entering the U.S, President Trump has also threatened tariffs on another $267 billion worth of goods – meaning all Chinese imports could be subject to tariffs. The US has also put tariffs on worldwide imports of goods like steel and washing machines, which further affects products from China.

China retaliated with $160 billion tariff on US goods – China hit back with tariffs worth $160 billion of US goods, accusing the US of starting the largest trade war in economic history. China has targeted products including chemicals, coal, and medical equipment with levies that range from 5% to 25%.

China has strategically targeted products made in Republican districts and goods that can be purchased elsewhere, like soybeans.

US-China Trade War rages on, as China’s exports rose back in January

China’s export rose dramatically in January 2019 due to a surge in exports to the European Union and Southeast Asia. Export rose by 9.1%, contradicting earlier forecast by Bloomberg of a 3.3% decline.

Also, in 2018, exports to the U.S. rose 11.3% year on year in 2018, while imports from the U.S. to China rose 0.7 percent over the same period. China’s surplus with the U.S. grew 17% from a year ago to hit $323.32 billion in 2018. It was the highest on record dating to 2006, according to Reuters.

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How the global economy will be affected?

From an economic standpoint, escalation in trade war would see a reduction in global trade and consequently global demand. For instance, a weaker US and Chinese economy would weaken global supply chains.

By extension, the weak global supply chain would result in slower global growth, and in turn, affect commodity prices.

This may not be a Trade War after all, but where does Africa stand?

There has been concern from the West that the Chinese policy of using Chinese banks to issue grants to developing economies, is deliberately designed to capitalise on their global financial infrastructure to rival the IMF and the World Bank.

That is to say that the tussle between the US and China may not just be a Trade War, but a war over who controls the world’s financial flows in the long term.

Meanwhile, as though response to the allegation levied against China of debt trapping developing economies like Nigeria with loans, China tripled its offerings of interest-free loans and grants to Africa to dispel such threat. This further deepens its romance with the African continent. Just recently, China offered $15 billion assistance to Africa, with about $60 billion aid package pledged to the continent.

Africa may be regarded as the new bride for the developed economies, for instance, China-African trade increased to $170 billion in 2017. A recent United Nations Conference on Trade and Development (UNCTAD) prediction shows that in the aftermath of the on-going trade war, Africa would be an enticing destination for these foreign goods.

Therefore, as president Trump continues to put tariffs on Chinese exports, China is gradually turning to Africa to make up the difference. In the end, both Africa and China will benefit.

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The Asian Romance and the Nigerian economy

Despite the lingering U.S-China Trade War, the Nigerian economy continues its economic romance with the Asian superpowers. Recent data from the National Bureau of Statistics (NBS) shows that Nigeria export to Asia was estimated at N1.42 trillion in just the last quarter of 2018. The country’s highest import, which also came from China, is estimated at N900 billion for the same period.

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Also, in terms of export, India is the biggest market for Nigeria export, with 15.53% of the total export in the last quarter of 2018. In the same period, Nigeria exported both oil and non-oil products worth N780 billion to the country. On the export chart, the U.S ranks 10th while India leads the top 10 recipients of Nigeria exports.

Last year when Nigerians became critical of the country’s $5 billion China loan, the Debt Management Office (DMO) stated the following:

“Borrowing from China Exim is one of such means of ensuring that Nigeria has access to more long term concessional loans. Given the country’s infrastructure deficit, which needs to be urgently addressed, the loans from China Exim, which provide financing for critical infrastructure in road and rail transport, aviation, water, agriculture and power at concessional terms, are appropriate for Nigeria’s financing needs and align properly with the country’s Debt Management Strategy.”

Hence, the bilateral trade war and  slowing growth in the two superpowers’ economies will create unwelcome challenges for Africa in terms of currencies, slower trades and dampened investor sentiment.

The most imminent impact is likely to be on emerging markets via financial markets. Increased anxiety surrounding the US-China Trade War could trigger large capital flights to safety and a sell-off in emerging markets’ riskier assets.

Another risk to the African continent comes from its particularly close economic relationship with China (Africa’s largest trading partner and a major investor), making it vulnerable to any potential weaknesses in the Chinese economy. Slower growth in China could, therefore, depress investment flows from there.

Meanwhile, Nigeria may just have discovered its “new oil”

A slowdown in China-centred trade would negatively affect demand for raw materials such as iron ore, coal, and platinum, which in the event of price burst could seriously distress any country (like Nigeria) which depends on trade with China.

With 923,763 km2 land arable land, the U.S-China trade tussle portends an opportunity for Nigeria to become a major supplier of agricultural products to China and other Asian neighbors.

Also, the rise in tariffs on Chinese goods going into the United States will create supply gaps in the U.S. market, exports from other countries become “more competitive” due to the tariffs on China. This situation presents new opportunities for Nigerian export in the United States market which is currently reducing.

As Reuters put it, summarising Carmen Ling, Managing Director and Global Head of RMB Solutions,

“We believe that countries like Kenya and Nigeria will benefit because China will look to import more from Africa; some agricultural products from Kenya, some oil products from Nigeria.”

Hence, the Nigerian Government needs to be forward-looking in policy formulation and implementation, that will aid penetration into the impending global markets that could open up.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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    Appointments

    Okonjo-Iweala announces appointment of 4 Deputy DG for WTO

    The DG of the WTO, Dr Ngozi Okonjo Iweala has appointed 4 new Deputy Director-Generals for the international trade organization.

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    Ngozi Okonjo Iweala, World Bank, Davos, World Economic Forum, WTO accepts nomination of Okonjo-Iweala as DG despite opposition from Egypt,WTO:  Happy to be in final rounds of DG Campaign- Okonjo Iweala

    The Director-General of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, on Tuesday, May 4, 2021, announced the appointment of 4 new Deputy Director-Generals for the international trade organization.

    The 4 newly appointed Deputy Director-General are Angela Ellard of the United States, Anabel González of Costa Rica, Ambassador Jean-Marie Paugam of France and Ambassador Xiangchen Zhang of China.

    The disclosure is contained in a public statement issued by the WTO on Tuesday, May 4, 2021, and can be seen on its website.

    This is coming barely 2 months after the resumption of Ngozi Okonjo-Iweala as the Director-General of WTO.

    Okonjo-Iweala in her statement said, “I am very pleased to announce the appointment of four new Deputy Directors-General at the WTO. It is the first time in the history of our Organization that half of the DDGs are women. This underscores my commitment to strengthening our Organization with talented leaders whilst at the same time achieving gender balance in senior positions. I look forward to welcoming them to the WTO.’’

    Ms Angela Ellard (United States) has a distinguished career of service working at the US Congress as Majority and Minority Chief Trade Counsel and Staff Director. She is internationally recognized as an expert on trade and international economic policy, negotiating trade agreements and supporting multilateral solutions as part of an effective trade and development policy. Ms Ellard has negotiated and delivered significant bipartisan trade policy outcomes and legislation for well over 25 years with Members of U.S. Congress and senior Trump, Obama, Bush, and Clinton Administration officials. Ms Ellard also worked as a lawyer in the private sector, working on trade litigation and strategy, policy and legislative issues. Ms Ellard obtained her Juris Doctor, cum laude from Tulane University School of Law and her Master of Arts in Public Policy also from Tulane. Ms Ellard is a frequent lecturer at law, graduate, and undergraduate classes and has published articles on trade law and policy.

    Ms Anabel González (Costa Rica) is a renowned global expert on trade, investment and economic development with a proven managerial track record in international organizations and the public sector. In government, Ms Gonzalez served as Minister of Foreign Trade of Costa Rica; as Director-General for International Trade Negotiations; as Director-General of the Costa Rican Investment Promotion Agency (CINDE); and as Special Ambassador and Chief negotiator of the US-Central America-Dominican Republic Free Trade Agreement. Ms Gonzalez also served at the World Bank as a Senior Director, the WTO as Director of the Agriculture and Commodities Division and as Senior Consultant with the Inter-American Development Bank. More recently, Ms Gonzalez has worked as a Non-Resident Senior Fellow with the Peterson Institute for International Economics. Ms Gonzalez obtained her master’s degree from Georgetown University Law Center with the highest academic distinction and has published extensively on economic issues and trade.

    Ambassador Jean-Marie Paugam (France) has held senior management positions in the French Government on trade, most recently as Permanent Representative of France to the WTO. He has also held a number of senior positions in the French Ministry of Economy and Finance, including as a member of the Executive Committee of the French Treasury. He has also served as Deputy Executive Director of the International Trade Centre in Geneva. He has accumulated a deep and practical knowledge of government practices on trade as well as being familiar with high-level dialogues on trade and international economic operations. He has published a number of articles on trade-related issues, in particular when serving as Senior Research Fellow on International Trade at the French Institute for International Relations (IFPRI). Ambassador Paugam graduated from ENA in Paris and obtained degrees in Political Science from the Institute of Political Science in Aix-en-Provence and in Law from the Faculty of Law Aix-Marseille III.

    Ambassador Xiangchen Zhang (China), who is currently serving as Vice-Minister in the Ministry of Commerce of China, has long and extensive experience on WTO issues, international negotiations, and policy research. Ambassador Zhang, until recently, served as China’s Permanent Representative to the WTO and previously as Deputy Permanent Representative.

    He has had an extensive career of more than 30 years in international trade, serving as Director of the Department of International Trade and Economic Affairs of the Ministry of Foreign Trade and Economic Cooperation; as Director-General of the Department of WTO Affairs of the Ministry of Commerce; and as Director-General of the Department of Policy Research of the Ministry of Commerce. Ambassador Zhang holds a bachelor’s degree in Law, a Master’s degree in International Relations and a PhD in International Politics from Peking University.

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    Around the World

    Meet Tami, the Nigerian teen with admission offers from 5 Ivy colleges, 9 others

    Tami’s goal is to work on innovations in AI and augmented reality and he hopes to work on research and projects in these fields in college.

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    Meet Tami, the Nigerian teen with admission offers from 5 Ivy colleges, 9 others

    Before now Oluwatamilore Kabiawu, popularly known as ‘Tami’ was only known as a 4.6 GPA student. But a few weeks back, news about him hit the web when he got admission offers from 14 colleges, including 5 Ivy Colleges.

    While his colleagues are worried about getting accepted into their choice Colleges, Kabiawu’s greatest challenge now is which to choose among a myriad of colleges. Some of the colleges are Harvard, Princeton, Yale, Cornell, Columbia and MIT.

    Tami’s secret

    The secret of the Fair Lawn High School senior has been described in several ways by different people.  To Joseph Lake, his guidance counsellor, Tami’s unrelenting spirit has taken him this far.

    He said, “Tami is truly a gifted young man. What Tami is experiencing is the result of his self-esteem and feelings of love and belongingness being nurtured to its full potential.”

    His mum, Dami, commented, “I’ve always taught them [Tami and twin brother Tommy] to believe in themselves and be very polite, to always stand their ground.”

    READ: What to consider as you budget for college

    A close relative hinted that Tami (Class Of 2021), is leaning heavily toward Harvard University, “the best of both worlds — technology and liberal arts,” where he aims to major in computer science and do research into artificial intelligence and augmented reality.

    To Kabiawu, his success stems from hard work and persistence.

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    “What makes me most happy is making these little goals and sticking with them, and gradually over time achieving the big goal,” he said.

    READ: Steps to take to bag international scholarships

    The Cow head story

    The accomplished track and field athlete, who is also the President of the Future Business Leaders of America and National Honor Society, is not limited to academics. His ability to think out of the box, and break norms is also his strength.

    He said, “I wrote my college essay on decapitated cow heads, which I know sounds a little crazy. I was 9 when I visited my family in Nigeria for a wedding.

    The cows were slaughtered near the reception so that the meat would not need to be refrigerated. As I walked by I just saw these decapitated cow heads and was really, like, shocked by it and really appalled.

    Rather than dismissing the unfamiliar, I recognized the importance of embracing differences. I likened the experience to growing up in Fair Lawn.

    READ: 7 Ways to pay for your higher education

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    I didn’t necessarily fit a particular stereotype of how people thought Black students should act. “Over time, I’ve gained confidence in myself, and people are drawn to that, and I was allowed to be more authentic.”

    This experience means a lot to the athlete, as the Cow heads changed his perception about fighters like him.

    “Now, I see “cow heads” as a metaphor for people who are unabashedly themselves and unafraid to show who they are,” he said.

    What you should know

    Tami’s goal is to work on innovations in AI and augmented reality and he hopes to work on research and projects in these fields in college.

    Tami was born in London, moved to Atlanta for a short while, then moved to Troy, New York where he attended elementary school while his mother pursued a PhD at Rensselaer Polytechnic Institute (RPI).

    The family relocated to Fair Lawn when Tami started sixth grade at Memorial Middle School. His twin brother, Tommy, will be playing football at RPI next year.

    Kabiawu is set to graduate on June 22 at Fair Lawn High School’s Sasso Field.

    Tami Kabiawu’s dad lives and works in Nigeria, and the son said his interest in technology stems from being able to connect with him via FaceTime and WhatsApp.

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