Dr. Bawumia warns against using tariffs to fix trade issues

Speaking at the International Democrat Union (IDU) Forum in Brussels on Saturday, May 17, Ghana’s former Vice President, Dr. Mahamudu Bawumia, warned that using tariffs to fix trade imbalances is not an effective solution. He explained that trade deficits are caused by deeper economic issues, not trade policy mistakes.

“Policymakers are increasingly ignoring both economic fundamentals and the lessons of history,” he said.

Dr. Bawumia pointed out that Africa only makes up 2.5% of global exports and 2.9% of imports, while major players like Asia, Europe, and the U.S. dominate trade. Even with this imbalance, he said, tariffs won’t solve the problem.

“You cannot fix a trade deficit with tariffs, it simply doesn’t work,” he emphasised.

He explained that a trade deficit happens when a country spends more than it saves, meaning the real problem lies in macroeconomic factors. “If a country spends more than it saves, it will run a trade deficit. That’s a macroeconomic problem, not a trade policy problem,” he added.

To support his point, he mentioned historical examples like the U.S. Smoot-Hawley Tariff Act of the 1930s, which worsened the Great Depression, and the U.S.- China tariff war in 2018–2019, which harmed global trade.

“The recent increase in average U.S. tariff rates from 2.4% to 10% is the largest since 1943, and its effects will be significant,” he warned.

Dr. Bawumia also said that rising tariffs, especially in the U.S., could force African countries to change their trade strategies. While Africa only trades a small amount with the U.S. (6.5% exports and 4.4% imports) some countries are more vulnerable. He mentioned Lesotho, which sends about 50% of its exports (mostly textiles) to the U.S. under the African Growth and Opportunity Act (AGOA). He warned, “AGOA is essentially going to collapse under these tariffs.”

Looking ahead, Dr. Bawumia predicted that Africa will focus more on self-reliance and increasing trade within the continent.

“What you’re going to see in Africa, as you’re seeing across the world, is more clamour for self-reliance. And you’re going to see more political space being created for intra-African trade as a way of dealing with this,” he concluded.