The specter of tariffs as a bargaining chip in international trade is once again looming large, with newly sworn-in U.S. President Donald Trump poised to reintroduce tariffs targeting key trade partners such as China, Canada, and Mexico.
As part of his “America First Trade Policy,” President Trump, during his second-term inauguration ceremony, announced plans to impose a 25% tariff on Canada and Mexico, alongside an additional 10% tariff on goods from China. The policy, expected to generate $1.2 trillion in tax revenue from 2025 through 2034, aims to protect American industries and jobs.
While these measures are primarily designed to recalibrate the U.S. trade balance and assert dominance in global trade negotiations, they should not necessarily be interpreted as entirely negative. Instead, developing nations like Nigeria must strategically position themselves to navigate the ripple effects and leverage the fallout for economic growth and enhanced global relevance.
The Fallout of Tariff Wars on Developing Economies
The imposition of tariffs by economic powerhouses invariably triggers a chain reaction, disrupting global supply chains, trade volumes, and investment flows. Developing nations, particularly those reliant on exports of raw materials and semi-processed goods, often find themselves at the mercy of these upheavals. For Nigeria, a country heavily dependent on crude oil exports, the potential decline in global demand or shifts in trade routes could exacerbate existing economic vulnerabilities.
From a legal perspective, tariff wars could lead to trade disputes under the World Trade Organization (WTO) framework or bilateral trade agreements. Nigeria must be prepared to leverage these legal avenues to protect its interests and challenge unfair practices that harm its economy. Additionally, the country must strengthen the legal environment for foreign direct investment (FDI) to remain attractive amidst the global uncertainty.
The ripple effects could also extend to the manufacturing sector. As tariffs alter the cost structures of imported machinery, components, and raw materials, Nigerian manufacturers may face rising production costs, potentially diminishing their competitiveness. Additionally, volatility in global markets could lead to currency fluctuations, further straining import-dependent industries.
Turning Challenges into Opportunities – Nigeria’s Strategic Positioning
The current Nigerian administration has already taken significant steps since its inauguration to prepare the country for potential economic shocks. Policies and reforms aimed at increasing domestic refining capacity, promoting agricultural productivity, and implementing the National Development Plan 2021–2025 highlight a commitment to diversification and economic resilience. These proactive measures position Nigeria to better shield itself from the global fallout of tariffs.
To further solidify its position, Nigeria can explore the following strategies:
- Leveraging Comparative Advantages: Nigeria is endowed with vast natural resources, a youthful population, and a growing domestic market. By focusing on sectors where it holds a comparative advantage—such as agriculture, solid minerals, and creative industries—Nigeria can carve a niche for itself in global trade.
- Diversification of Export Base: Nigeria’s over-reliance on crude oil revenue has long been identified as a critical weakness. The global trade disruptions underscore the urgency of diversifying the country’s export base. By prioritizing the development of non-oil sectors such as agriculture, solid minerals, and manufacturing, Nigeria can insulate itself from the volatility of international commodity markets.
- Regional Trade Partnerships: With global trade becoming increasingly fragmented, the African Continental Free Trade Area (AfCFTA) presents a unique opportunity for Nigeria to deepen intra-African trade. By fostering stronger trade ties within the continent, Nigeria can reduce its dependence on external markets while positioning itself as a hub for regional manufacturing and logistics.
- Value Addition and Industrialization: Instead of exporting raw materials, Nigeria must invest in value addition through industrialization. Processing agricultural produce, refining crude oil domestically, and manufacturing finished goods can create jobs, increase export revenue, and reduce vulnerability to global trade dynamics.
- Strengthening Legal and Institutional Frameworks: A robust legal framework is essential to support trade diversification and industrialization. Nigeria must ensure the enforcement of trade policies that protect local industries, encourage investment, and facilitate the resolution of trade disputes. Strengthened intellectual property (IP) laws will also be critical to fostering innovation and attracting global partnerships.
The Role of Industry Associations and Allied Interests
Organizations such as the Manufacturers Association of Nigeria (MAN) and other allied interest groups have a pivotal role to play in ensuring Nigeria’s resilience and competitiveness in the face of global trade volatility:
- Advocacy for Policy Support: MAN and similar bodies must advocate for policies that promote local manufacturing, protect industries from unfair competition, and provide incentives for export-oriented businesses. These efforts should include lobbying for favorable trade agreements and tariff structures.
- Capacity Building and Training: Industry associations can facilitate skill development and capacity-building initiatives to prepare businesses for emerging challenges and opportunities in global trade.
- Market Intelligence and Research: Providing members with timely market intelligence, trade insights, and access to global networks will enable Nigerian businesses to navigate changing trade dynamics effectively.
- Driving Regional Integration: Associations can champion the implementation of AfCFTA protocols, ensuring Nigerian businesses reap the benefits of expanded market access within Africa. This includes advocating for the harmonization of legal and regulatory frameworks across member states to reduce trade barriers.
Charting a Path Forward
While the impending tariff wars pose significant challenges, they also present an opportunity for Nigeria to reposition itself within the global economic order. By embracing diversification, fostering innovation, and strengthening regional ties, the country can transform potential setbacks into stepping stones for sustainable growth. However, achieving this vision requires collaboration between government, private sector stakeholders, and industry associations to craft policies and strategies that prioritize resilience, adaptability, and long-term competitiveness.
From a legal perspective, Nigeria must actively participate in international trade negotiations, leveraging its position in multilateral and regional bodies to advocate for fair trade practices. Domestic legal reforms that enhance ease of doing business, protect investments, and promote industrialization will be crucial in charting a sustainable path forward.
