US-China Tariff Dispute Threatens to Worsen Nigeria’s Trade Deficit with China
The ongoing tariff war between the United States and China is predicted to negatively impact the Nigerian economy, particularly worsening the trade deficit between Nigeria and China. Analysts from Meristem Securities, in a recent macroeconomic update, highlighted the potential for increased imports from China as a result of the tariff war, further escalating Nigeria’s trade imbalance with its largest trading partner. As of Q3 2023, Nigeria’s trade deficit with China stood at N7.54 trillion, and the tariff tensions are expected to deepen this gap.
The trade war, triggered by the Trump administration’s imposition of additional tariffs on Chinese goods, has led to retaliatory actions by China, such as restricting exports of key metals to the US and increasing tariffs on American products. This disruption in global trade flows may redirect more imports to Nigeria, exacerbating the country’s trade deficit. The analysts warned that this situation could worsen currency depreciation risks and place significant pressure on Nigeria’s foreign reserves.
Additionally, analysts raised concerns about potential capital flight from emerging markets like Nigeria as a result of the tariff war’s ripple effects. A stronger US dollar, driven by rising inflation and higher interest rates in the US, could further undermine the Nigerian economy by making imports more expensive and increasing inflation. This could lead to volatility in Nigeria’s foreign exchange market and complicate efforts by the Central Bank of Nigeria to stabilize the naira.
On a positive note, trade between Nigeria and China reached a record $20 billion in 2024, with Nigeria becoming China’s third-largest trade partner in Africa. The Chinese ambassador to Nigeria, Yu Dunhai, noted the strengthening bilateral relationship between the two nations, with both countries looking forward to further cooperation in 2025. However, the analysts concluded that economic challenges stemming from the US-China tariff war could dampen Nigeria’s economic stability in the medium term.
Source: Punch