Global trade war threatens Nigeria, emerging markets

The intensifying trade war between the United States, China, and North American countries is expected to have significant economic ramifications for Nigeria and other emerging markets, according to industry experts.

The latest round of tariffs imposed by the U.S. government could disrupt global trade flows and impact key sectors, including oil exports and non-oil revenue generation in Nigeria.

Earlier this week, U.S. President Donald Trump imposed a 25% tariff on goods from Mexico and Canada, in addition to a 20% tariff on Chinese imports.

This marks an escalation of trade tensions, following an earlier round of U.S. tariffs on Chinese goods last month.

In response, China has retaliated with a 15% tariff on American imports, including poultry, pork, soy, and beef, while also tightening restrictions on business engagements with U.S. firms. Canada has likewise introduced countermeasures to mitigate the impact of the tariffs.

Nigeria’s economy is heavily reliant on oil exports and foreign direct investments, analysts warn that the ongoing trade dispute could influence the country’s economic stability.

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The Nigerian government has been focusing on increasing non-oil revenue streams, especially through policies like the Finance Act, which aims to capture multinational corporations within the tax net.

Furthermore, the Federal Government (FG) recently waived import duties on medical supplies and directed the Nigerian Customs Service to expedite the clearance of essential goods.

These measures highlight the government’s proactive approach to mitigating economic disruptions.

Speaking on the Drinks and Mics podcast, Samson Esemuede, Managing Director and Chief Investment Officer of Zrosk, predicted that U.S. economic growth would slow relative to other global markets, regardless of whether the trade war escalates or de-escalates.

He emphasized that financial markets thrive on certainty, and the unpredictability of Trump’s trade policies creates economic risks.

“So, within that context, I felt like relative growth rates for the rest of the world in favor of the rest of the world, we pull capital out of the U.S., which is why when we did our buy-hold-sell analysis, I had a sell on the U.S. That leads to a weakening dollar, which should benefit emerging markets like Nigeria,” Esemuede noted.

However, he cautioned that if the U.S. enters a recession, the resulting global economic shock could strengthen the U.S. dollar, leading to capital flight from emerging markets.

Echoing Esemuede’s sentiments, Arnold Dublin-Green, Chief Investment Officer at Cordros Capital Ltd, stated that a weak dollar typically benefits emerging markets.

“A weak dollar also means our commodity prices are good. Countries like Ghana with gold, South Africa, and Kenya with their export markets will benefit. Even for Nigeria, it’s a net positive since our external debts become easier to service,” he explained.

Dublin-Green added that the market’s current trajectory favors economies that depend on commodity exports, as investors seek undervalued assets in emerging markets.

Premier Li Qiang recently announced a 7.2% increase in China’s defense spending, maintaining the level of military expenditure seen last year. Beijing aims to project confidence in its economic resilience despite global uncertainties.

China’s leaders have framed their country as a stable and peaceful global power, in contrast to the United States, which they accuse of being entangled in conflicts in the Middle East and Ukraine.

Analysts believe Beijing may also seek to strengthen trade relations with U.S. allies such as Canada and Mexico, which have also been hit by tariffs, rather than escalating tensions further.

As global trade tensions mount, Nigeria and other emerging markets will need to navigate an increasingly uncertain economic landscape.