Nigeria and Africa are now facing the reality of imminent external sector shocks as the United States, under President Donald Trump, enforces tough new tariffs on various global economies.

These measures have triggered retaliatory actions from affected countries, escalating into a global trade war. Beginning tomorrow, the U.S. will implement a 25% tariff on imports from Mexico and Canada, alongside an additional 10% tariff on Chinese goods. In response, Canada has announced its own counter-tariffs, while Mexico is also planning retaliatory measures against the U.S.

China, on its part, has vowed to challenge the tariffs through the World Trade Organization (WTO), stating that the move "seriously violates" WTO regulations. The U.S. tariff order warns that if any of these nations retaliate with import duties or similar measures, the administration may further expand or increase tariffs to reinforce its trade stance.

According to the White House, these tariffs aim to curb undocumented immigration and illicit drug inflows, boost domestic manufacturing, and generate federal revenue. President Trump, in a statement posted on social media, justified the order under the International Emergency Economic Powers Act, citing the "major threat of illegal aliens and deadly drugs, including fentanyl, killing our citizens."

Canadian Prime Minister Justin Trudeau announced a retaliatory 25% tariff on $155 billion worth of American goods, with an initial $30 billion taking effect immediately and an additional $125 billion in 21 days to give Canadian companies time to adjust supply chains. Similarly, Mexican President Claudia Sheinbaum directed her economic secretary to draft a response that includes counter-tariffs and other measures to "defend Mexico’s interests." She also rejected U.S. claims linking Mexico to criminal organizations, condemning any attempt at interference in the country’s internal affairs.

Implications for Nigeria and Africa

For Nigeria and the broader African economy, these developments pose significant challenges, as their economies lack the internal resilience to withstand external pressures and have limited capacity to retaliate.

Nigeria, in particular, faces three key threats from Trump's trade policies:

1. Oil Market Disruptions – The Trump administration's plans to expand domestic crude oil production are expected to lead to an oil glut, potentially crashing global prices. Given Nigeria's heavy dependence on oil exports, this could severely impact its economy.
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3. Tariffs on Oil and Gas Imports – Last week, Trump announced plans to impose tariffs on oil and gas imports, with implementation expected by February 18, 2025. He warned that these tariffs would be layered on top of any existing ones, further straining global energy markets.
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5. Expanded Tariffs on Key Raw Materials – The U.S. is also set to impose additional tariffs on steel, aluminum, and copper, materials sourced from Nigeria and other developing nations, potentially disrupting trade and revenue flows.

The Decline of AGOA and African Trade

Trump’s trade policies are also expected to affect the African Growth and Opportunities Act (AGOA), which has allowed Nigeria and other African countries to export goods to the U.S. under concessionary tariff rates for the past 15 years. While AGOA was due for renewal last year, congressional delays pushed the decision to this year. However, Trump has signaled his opposition to its continuation, effectively shutting down this trade window.

Additionally, the new policies threaten African businesses operating in the U.S., particularly "African Shops"—a sector valued at over $15 billion annually. These stores primarily trade in agricultural food products sourced from Africa, with Nigeria being a major supplier.

For now, Nigeria and other African nations have yet to formulate a strategic response to these developments, leaving their economies vulnerable to the ripple effects of U.S. trade policy.