Dr. Akinwumi Adesina, the African Development Bank President, has warned of economic shockwaves from the new US tariffs, which could have far-reaching consequences for African countries.
Speaking to CNN’s Christiane Amanpour, Dr. Adesina revealed that 47 of Africa’s 54 countries will be impacted directly by the new U.S. trade policies issued by President Donald Trump’s administration early this year, with potential declines in export revenues and foreign exchange reserves.
“When those currencies weaken, two things will happen: first, you will find that most of these countries are import-dependent. So, you are going to find that high inflation becomes a problem,” said Adesina, adding, “And secondly, you find that the cost of actually servicing a lot of their debt, which is foreign currency debt, but in local currencies, is going to get worse.”
Impact on Uganda
Uganda, like many other African countries, could be significantly impacted by the US tariffs. The country’s economy is heavily reliant on imports, and the increased costs associated with the tariffs could lead to higher prices for goods and services.
Uganda’s export sector, including coffee, cotton, and tobacco, could also be affected, potentially leading to a decline in foreign exchange earnings.
Economic Consequences
The economic consequences of the US tariffs on African countries could be severe. Dr. Adesina highlighted two major concerns:
High inflation
As African currencies weaken, import-dependent countries will experience high inflation, making it difficult for people to afford basic goods.
Debt servicing
The cost of servicing foreign currency debt will increase, putting a strain on countries’ finances and potentially leading to debt distress.
Limited Trade Relationship
Dr. Adesina noted that despite the potential impact, Africa accounts for only 1.2% of America’s global trade, with a trade surplus of just US$7.2 billion. This limited trade relationship makes it crucial for African countries to engage with the US constructively.
A Three-Point Strategy
Dr. Adesina proposed a pragmatic three-point strategy for African countries to mitigate the effects of the US tariffs:
Engage the US
African countries should engage in flexible and constructive trade negotiations with the US to find mutually beneficial solutions.
Diversify export markets
African countries should diversify their export markets to reduce dependency on any single partner and minimise the impact of trade disruptions.
Accelerate AfCFTA implementation
He explained that the African Continental Free Trade Area (AfCFTA) has the potential to unlock a US$3.4 trillion market, and accelerating its implementation could help African countries to increase intra-African trade and reduce their reliance on external markets.
Moving Beyond Aid Dependency
Dr. Adesina also emphasised the need for African countries to move beyond aid dependency and focus on domestic resource mobilisation, infrastructure development, and value-added industrialisation.
He called for bold investments in these areas and for aid to be turned into concessional financing to allow multilateral financial institutions to mobilize more private capital and derisk projects.
The US tariffs could have significant economic consequences for African countries, including high inflation and debt servicing challenges.
However, by engaging with the US, diversifying export markets, and accelerating AfCFTA implementation, African countries can mitigate these effects and promote economic growth and development.
As Dr. Adesina noted, the era of aid dependency is over, and African countries must focus on building their economic resilience and promoting sustainable development.