The ongoing trade war between the United States and China has been a major topic globally, with both countries imposing tariffs on each other’s imports. This clash has been in the headlines for years as the two economic giants contest who will become the world’s biggest economy.
The trade war began in 2018, fueled by concerns over trade imbalances, intellectual property disputes, and protectionist policies. The U.S. accused China of unfair trade practices, while China responded with its own measures.
The large and unsustainable trade imbalance between the U.S. and China, partly influenced by the undervaluation of the Chinese currency (RMB), appears to have been a driving factor behind U.S. tariffs on Chinese goods. Other reasons include China’s systematic theft of U.S. intellectual property and the “putting America first” strategy aimed at restoring manufacturing jobs in the U.S.
Escalation of Tariffs
The tariff war officially started when President Trump introduced a 30% tax on solar panels and washing machines, a 25% tax on steel imports, and a 10% tax on aluminum goods from China. In response, China hit back by imposing taxes on 128 U.S. imports, amounting to $3 billion. Since China exports significantly more to the U.S. than it imports, the shrinking trade surplus resulted in decreased revenue for China. This reduction is likely to impact China’s investments, loans, grants, and development aid to countries like Ghana.
The U.S. then released a list of 1,300 Chinese goods, primarily from the technology and pharmaceutical industries, valued at $50 billion, taxed at 25% according to a journal cited in scienddirect.com – China countered with tariffs on 106 U.S. goods, including cars and airplanes.
The tariff war continued to escalate, with U.S. taxes on Chinese exports reaching $505 billion and covering nearly all Chinese goods the same journal indicated in its research. Despite the signing of the Phase-One trade agreement in January 2020 and the change in administration in January 2021, the trade conflict persists, affecting the global economy.
Impacts on Sub-Saharan Africa (SSA)
Both the United States and China are key trade partners for Sub-Saharan Africa (SSA). Their economic ties are strengthened through agreements like the African Growth and Opportunity Act (AGOA) and the Forum on China-Africa Cooperation (FOCAC). According to World Integrated Trade Solution (WITS) data from 2019, SSA’s exports to China totaled $25.9 billion (10.8% of total exports), while exports to the U.S. reached $12.4 billion (5.1% of total exports). SSA’s imports from China and the U.S. were valued at $45.5 billion (17.9% of total imports) and $16.4 billion (6.4% of total imports), respectively.
SSA mainly exports raw materials such as oil, minerals (gold and diamonds), and agricultural products like cocoa beans. Changes in trade policies between the U.S. and China could significantly impact SSA economies.
Studies on Sub-Saharan Africa trade war impact
Few studies focus on how the U.S.–China trade war affects Africa, but their findings show mixed results. Some studies found that the trade war slightly increased China’s interest in African resources while others observed a decline in African agricultural exports during 2018 and 2019 compared to regions like Latin America and Asia. Using data from 1970 to 2017, David Olayungbo predicted both positive long-term impacts on oil-exporting countries like Gabon, Egypt, Angola, and Algeria, and negative effects on Tunisia and Nigeria.
Opportunities for Sub-Saharan Africa
Research published in the Journal of Policy Modeling (Volume 45, Issue 6) shows that changes in trade policies between the U.S. and China create opportunities for SSA countries. On average, SSA’s GDP increases by 0.04%, while exports and imports grow by up to 0.02% and 0.05%, respectively. Ethiopia and Kenya record the highest growth in GDP, income, and spending, followed by Tanzania, Ghana, Nigeria, South Africa, and the rest of SSA.
At the sector level, agriculture, food, and oil and gas exports benefit from the trade war. South Africa, Tanzania, and Ethiopia see the most growth in agriculture and food exports, while Nigeria and Ghana experience gains in oil and gas exports.
Effects on Ghana
Ghana relies heavily on exporting cocoa, gold, and oil. China is one of the largest buyers of raw materials from Africa, including Ghana. If the trade war reduces China’s demand due to higher tariffs or an economic slowdown, Ghana’s export earnings could drop. This would mean less revenue for the government and fewer funds for development projects.
Higher Prices for Imported Goods
Tariffs on imported goods from the U.S. and China have significantly impacted Ghanaian businesses and consumers. According to the Ghana Ports and Harbours Authority, Ghana’s imports have declined by 10% over the past year due to high import duties. This reduction in imports has led to increased costs for goods like electronics, machinery, and automobile parts, which are essential for many businesses and households.
The Ghana Chamber of Commerce estimates that the number of businesses operating in the country has decreased by 8% during the same period, largely due to the financial strain caused by higher import costs. Inflation has also surged, reaching a three-year high of 23.6% in 2023, driven by the increased prices of imported goods.(modern Ghana) These higher costs are often passed on to consumers, making everyday items like phones and car repairs more expensive. (Ghana Revenue Authority’s Customs Tariffs and Levies)
Commodity Price Fluctuations
The trade war between the U.S. and China has caused fluctuations in global commodity prices, which have impacted Ghana’s economy in several ways. Ghana imports wheat and other agricultural products that are crucial for industries like bread production and beverage manufacturing. Tariffs imposed by China on U.S. agricultural products such as wheat and soybeans have caused price volatility, raising the cost of imports. This has affected Ghanaian industries that rely on these commodities, as reported by GhanaWeb.
Cocoa is one of Ghana’s key exports, and global demand for cocoa can shift due to trade tensions. If China’s demand for U.S. agricultural products decreases, it may turn to alternative suppliers like Ghana, potentially benefiting the country. However, price instability in global markets can also negatively impact Ghana’s export earnings. The Center for Strategic and International Studies (CSIS) estimates that Africa could lose approximately $75.26 billion annually due to reduced demand caused by U.S.–China trade disputes.
According to the Ghana Statistical Service, fluctuations in global commodity prices driven by trade wars have significant consequences for Ghana’s economy. Higher import costs for agricultural products lead to increased production expenses for local industries, adding economic pressure.
Foreign Investment Challenges
Foreign investment plays a crucial role in Ghana’s economic development, particularly in infrastructure projects and job creation. However, the ongoing U.S.–China trade war has introduced significant economic uncertainty, which can make investors hesitant to commit funds to developing countries like Ghana.
The trade war has disrupted global economic stability, leading to reduced investor confidence. According to the Center for Strategic and International Studies (CSIS), Africa could lose approximately $75.26 billion annually due to reduced demand caused by U.S. and China trade disputes. This decline in foreign investment affects Ghana’s ability to fund infrastructure projects and create jobs, slowing economic growth.
Economic Growth Deceleration
The International Monetary Fund (IMF) has indeed highlighted the impact of global trade tensions on economic growth in Africa, including Ghana. According to the IMF’s World Economic Outlook, Africa’s projected growth rate for 2025 has been revised downward to 3.6%, reflecting the challenges posed by trade disputes and economic uncertainty (Imf.org). For Ghana specifically, the IMF estimates a growth rate of 4.4% in 2025, which is lower than previous projections.
The slowdown in economic growth has direct implications for employment opportunities and the ability to meet development targets. According to the United Nations Conference on Trade and Development (UNCTAD), global trade tensions have disrupted supply chains and delayed investment decisions, further exacerbating economic challenges for developing countries like Ghana (Trade and Development Foresight 2025).
Opportunities for Ghana
Interestingly, the trade war creates opportunities for Ghana. As U.S. and Chinese companies look for new suppliers, Ghana could step in. For example, Ghanaian businesses might export more processed goods or raw materials. However, this requires investment in infrastructure and manufacturing to meet global standards.
To navigate the challenges posed by the ongoing trade war between the U.S. and China and to ensure sustainable economic growth, Ghana can take several proactive steps.
First, Ghana should explore trade opportunities with countries like India and the European Union. By expanding its trade partnerships, Ghana can reduce its reliance on the U.S. and China, safeguarding its economy against external shocks caused by tensions between these two global powers.
Second, adding value to exports is essential for maximizing earnings. For example, rather than exporting raw cocoa beans, Ghana could focus on processing them locally to produce finished goods like chocolate. This approach not only fetches higher prices but also creates more jobs within the country, boosting economic development.
Investing in domestic industries is another important strategy. By strengthening local manufacturing, Ghana can reduce its dependence on imports and ensure greater economic stability. Developing strong industries at home will also create employment opportunities and promote long-term growth.
Lastly, Ghana can take advantage of regional trade agreements such as the African Continental Free Trade Area (AfCFTA). These agreements can help Ghana increase trade within Africa, reducing its dependency on international markets and fostering economic cooperation with neighboring countries.
By implementing these strategies, Ghana can better position itself to handle global challenges and leverage new opportunities for economic growth.
