Navigating the Impact of US Reciprocal Tariffs on Developing Countries Amid Global Trade Threats

The global trade landscape is continually evolving, shaped by economic policies, international relations, and market dynamics. A significant development is the United States' implementation of reciprocal tariffs, which has raised concerns for developing countries that heavily depend on exports to the US. This article examines the impact of these tariffs and the broader challenges in global trade faced by developing nations.

Understanding US Reciprocal Tariffs

Reciprocal tariffs are trade barriers implemented by a country in response to tariffs imposed on its own products by another nation. Recently, the United States has adopted a more protectionist approach, instituting tariffs on a diverse array of goods from various countries. For example, in 2018, the US enacted tariffs on Chinese imports valued at $34 billion, significantly impacting sectors such as steel, aluminum, and consumer goods.

This change aims to protect local industries; however, it may adversely affect global trade, particularly for developing nations with limited economic resources. As a result, their exports could become less competitive in the U.S. market, potentially leading to decreased sales and economic downturns.

On March 4, 2025, the President of the United States, during the annual State of the Union Address, announced a new policy regarding tariffs on companies that manufacture products outside the United States but rely heavily on the U.S. consumer market. This policy indicates that these companies will face substantial tariffs as a reciprocal measure to address ongoing trade deficits between the U.S. and their respective countries.

The rationale behind this policy stems from the long-standing practice of many countries imposing tariffs on U.S. goods, which has hindered American businesses from accessing foreign markets as easily as foreign companies can access the U.S. market. By acknowledging that both allies and adversaries have enforced significant and often unfair tariffs against U.S. exports, the introduction of reciprocal tariffs aims to restore fairness and balance in international trade, ultimately benefiting American consumers and businesses.

On April 3rd, 2025, a new trade policy was announced aimed at adjusting global trade flows. This policy introduces an additional ad valorem duty on all imports from trading partners, with the exception of those outlined in Annex II of the policy documents. The initial additional ad valorem duty will be set at 10 percent for all imports from trading partners. Subsequently, this duty is scheduled to increase for trading partners listed in Annex I, in accordance with the rates specified in Annex I of the same document.

During the initial phase of reciprocal tariffs, exemptions were granted to various commodities, including:

1. Critical and rare-earth minerals

2. Energy and energy products

3. Semiconductors and advanced technologies

4. Pharmaceuticals (temporarily)

5. Lumber

6. Other specified goods

These exemptions were designed to mitigate the impact of tariffs on essential industries and ensure the continued availability of crucial resources. Read full Trade policy on the reciprocal tariffs here

US Reciprocal Tariffs Placed on 4th April 2025

Countries such as Lesotho (50%), Madagascar (47%), and Mauritius (40%) have been significantly impacted in Africa and are expected to experience some of the most severe consequences. In Asia, nations including Cambodia, Laos, Vietnam, Sri Lanka, and Myanmar have faced tariffs of at least 40% on the majority of their exports to the American market. Trade and political allies such as the European Union (20%), Taiwan (32%), Switzerland (31%), Norway (16%), India (27%), South Korea (25%), Japan (24%), Jordan (20%), Israel (17%), and the Philippines (17%) have also encountered substantial tariffs. China, recognized as the United States' largest economic competitor, is subject to a 34% tariff in addition to a 20% tariff that was implemented in January 2025, resulting in a cumulative tariff rate of 54% under the current administration.

Countries such as Ghana, the United Kingdom, Singapore, the United Arab Emirates, and Saudi Arabia, which maintain favorable trade balances with the United States, are subject to a uniform tariff rate of 10%. It is important to note that Russia and North Korea are not included in this list, primarily due to the extensive sanctions imposed on them. These sanctions are a result of the ongoing conflict in Ukraine and issues related to nuclear proliferation, respectively.

Economic experts contend that the reciprocal tariffs revealed on April 3, 2025, will negatively impact Americans by increasing production costs and goods prices (inflation), potentially triggering an economic recession. There is anticipation that other countries may impose retaliatory tariffs, which could result in political and economic isolation.

Several experts and analysts have forecasted overwhelmingly negative impacts on global trade and economies, labeling tariffs as “counter-productive.” Investors both within and outside the US are also worried about the decision to impose tariffs globally. This has led to the largest global stock market decline since 2020. For instance, The Economic Times indicates that industry leaders are uncertain about the manufacturing boom promised by the US President, which is based on his Tariff Strategy to rejuvenate the domestic manufacturing sector. Some experts and political commentators have criticized the formula used to calculate the reciprocal tariff rates, arguing that the rates are inflated and do not accurately reflect the existing tariffs on American goods in various countries.

In summary, numerous economists are puzzled by the new trade policy that primarily relies on tariffs and are worried that this decision could potentially trigger a trade war with major global economic powers, particularly China and the EU. The alarm, criticism, and lack of trust from world-renowned economists could indicate a possible failure for the United States to achieve its objectives through tariffs.

Examining Plausible Assumptions Underpinning the US Government's Policy Decision

By analyzing speeches, interviews, and social media posts from the US administration, we can explore reasonable assumptions behind the implementation of reciprocal tariffs and propose potential retaliatory actions from US trading partners.

• Assumption Number #1: Most countries may lack the capability to retaliate or enter into a trade war with the United States.

The US administration has a comprehensive understanding of the global economy. They recognize that many countries are experiencing high inflation due to the ripple effects of the Covid-19 pandemic and the current instability from ongoing global conflicts. Tariffs can significantly negatively impact the economy of the imposing country, even though they are a protectionist measure. If the country imposing tariffs lacks the capacity to internally compensate for any shortages in commodities that may result from the tariffs, price increases and inflation for these commodities are likely to occur naturally. The Key points are as below

1. Understanding of global economic dynamics

2. Recognition of inflationary pressures from Covid-19 and global conflicts

3. Potential negative impacts of tariffs on the imposing country's economy

4. Risk of price increases and inflation due to commodity shortages

Despite worries about the impact of the tariffs, the US administration firmly believes that these tariffs can benefit American businesses and citizens. They assert that the tariffs will bring industries and manufacturing jobs back to the US. Additionally, they are confident that although food prices, inflation, and interest rates might increase significantly in the short term, they will decrease over time due to the tariffs. The administration is optimistic that the new tariffs will not trigger a global trade war and anticipates that most countries will likely negotiate for a "fair" agreement.

Indeed, most countries individually may lack the ability to impose counter tariffs due to challenges in replacing American imports, but they could achieve this collectively through various continental, regional, or economic blocs. Some countries, like China, may retaliate independently, given their proven resilience to U.S. tariffs and trade wars over the years. Mexico and Canada have responded to the tariffs imposed on them on February 1^st. Other blocs such as the EU, BRICS+, OPEC+, AU, ECOWAS, ASEAN, GCC, and MERCOSUR could potentially retaliate as a unit, depending on the impact of the tariffs on their members.

Nevertheless, many countries or blocs might be reluctant to engage in a trade war with the US, as it could result in losing access to the world's largest consumer market. Instead, they might choose to negotiate in accordance with the US administration's expectations. Let's examine the potential actions of some global trade participants:

China serves as a pertinent example of a nation that has navigated significant economic and trade tensions, particularly with the United States, since the onset of the Economic Conflict in 2018. In response to these pressures, China has strategically forged new trade partnerships, enhanced its trade relationships with countries in the Global South, and developed resilient supply chain networks to mitigate the impact of potential escalations in trade conflicts with the US. As a demonstration of its readiness to respond to trade challenges, China announced a counter-tariff of 34% on US imports. This action prompted a threat from the US administration to impose an additional 50% tariff on Chinese exports. China's proactive stance indicates its preparedness to counter any tariffs imposed by the US, raising the possibility of a more extensive trade war between the two nations.

The European Union (EU) is the largest trading partner of the United States, with trade volumes reaching EUR 1.6 trillion in 2023. As a dynamic economic entity comprising 27 member states and boasting a GDP of approximately $18 trillion, the EU has initially proposed a 25% tariff on certain US imports as a retaliatory measure. However, it is expected that the EU may pursue negotiations following this initial tariff response for several reasons.

1. Despite an average inflation rate of 2.4% in the EU for 2024, inflationary pressures continue to persist due to economic sanctions on Russia and the ongoing conflict in Ukraine. Initiating a trade war with the US could further strain the EU's economy; thus, negotiations may represent a more pragmatic short-term strategy.

2. The ReArm Europe Plan, which allocates EUR 800 billion for defense spending to counter the military threat posed by Russia, could increase the fiscal burden on EU governments and citizens. The EU aims to establish a fiscal space of EUR 650 billion and an additional loan facility of EUR 150 billion to support the ReArm Europe initiative. This could necessitate expanding the tax revenue base across the EU to raise funds through taxation and refinance long-term debt. Both initiatives will place significant pressure on EU citizens, making a tariff war with the EU's largest trading partner impractical. Consequently, the EU is likely to seek ways to minimize economic pressures.

3. The economic and political ties between the EU and the US are so significant that a tariff-induced trade war could have detrimental effects on both parties, leading to severe economic repercussions. Many EU member states are cautious about imposing counter-tariffs on the US. Any reciprocal tariffs are likely to be implemented carefully, gradually, and diplomatically to avoid a full-scale trade war, which could be disastrous for the EU's economy, especially in light of existing trade tensions with China.

4. Political divisions in voting patterns within the EU could delay the implementation of retaliatory tariffs. It is important to note that all 27 member states must reach a consensus before any decision to apply counter-tariffs on the US is finalized. Some countries may oppose the proposed 25% initial retaliatory tariff or any long-term trade war with the US due to the potential negative impact on their economies and trade relations. Similar scenarios have been observed during the EU's enforcement of sanctions on Russia's energy imports.

In Africa, most countries are assigned the lowest tariff rates of 10%. However, Lesotho, Madagascar, and Mauritius face the highest rates, which start at a minimum of 40%. Politically and economically, African nations are often fragmented, leading to missed opportunities for leveraging their collective bargaining power through frameworks such as the African Union (AU) or the African Continental Free Trade Area (AfCFTA), both of which present significant economic potential. Historically, African leaders have preferred bilateral negotiations, opting not to fully utilize the considerable collective bargaining strength available within various regional and continental blocs.

Due to the fragmentation within the African continent and its various regional blocs, it is probable that individual African countries will refrain from imposing reciprocal tariffs on the United States. This cautious approach aims to prevent a trade war, further retaliation, or potential exclusion from the African Growth and Opportunity Act (AGOA).

While collectively, African nations possess the capacity and capability to pose a significant threat of reciprocal tariffs against the US, on an individual basis, most countries are unlikely to implement such countermeasures. Instead, they may prefer to engage in bilateral negotiations with the US administration to address their trade concerns.

Following Brexit in 2020, the United Kingdom has continued to uphold economic and political alliances that resemble those of the European Union. The UK is currently navigating similar economic challenges, which have arisen from the aftermath of the COVID-19 pandemic and ongoing geopolitical conflicts, particularly in Ukraine and the Middle East. These conflicts have notably disrupted maritime navigation in the Red Sea, further complicating trade dynamics.

The UK has implemented a tariff of 10%, which is regarded as moderate and politically manageable. This tariff structure may facilitate potential trade agreements between the UK and other nations. Despite concerns regarding the potential negative impacts of tariffs on UK businesses and their market share in the United States, counter tariffs remain a viable option for the UK government. However, given the strong trading relationships that exist, it is expected that the UK will prioritize negotiations over the imposition of counter tariffs or the escalation into a trade war, similar to the approach taken by the EU.

The ASEAN nations have been significantly affected by the introduction of tariffs, facing an average tariff rate of 33%. The specific rates for each member country are as follows:

1. Brunei: 24%

2. Cambodia: 49%

3. Indonesia: 32%

4. Laos: 48%

5. Malaysia: 24%

6. Thailand: 36%

7. Vietnam: 46%

8. Singapore: 10%

9. Myanmar: 44%

10. The Philippines: 17%

Similar to some African nations, ASEAN often engages in bilateral negotiations rather than acting as a unified bloc. Since the tariffs were implemented, several ASEAN leaders have expressed their concerns. The Prime Minister of Singapore has publicly stated on Facebook that Singapore will not impose reciprocal tariffs on US goods, citing the existing free trade agreement between Singapore and the United States.

Similarly, the Prime Ministers of Vietnam and Thailand have voiced their disappointment but are open to negotiating with the US on an individual basis, opting not to impose counter tariffs on US imports. Hanoi has even suggested the possibility of removing all or most tariffs on US imports. Indonesia's Chief Economic Minister has also announced that Indonesia will refrain from imposing reciprocal tariffs on the US and will seek a mutually beneficial agreement.

The response of ASEAN countries to the tariffs reveals a divided stance, indicating a lack of cohesion within the Association. This fragmentation has resulted in missed opportunities for collective bargaining or unified pressure against the tariffs. Many of these nations previously benefited from free or preferential trade agreements with the US, and the newly imposed tariffs pose a significant economic challenge to their short-term stability. As a result, most, if not all, ASEAN countries are likely to pursue negotiations with the US to reach a favorable agreement.

India is increasingly recognized as a global economic superpower, demonstrating significant capabilities to compete with major economies such as China and the United States. A report from the Economic Times highlights that the Commerce Minister of Trade has indicated ongoing communication with the US to facilitate further negotiations and to explore potential opportunities arising from the new US trade policy.

This proactive approach suggests that India is not planning to impose reciprocal tariffs on the United States. Such tariffs could have adverse effects on India's manufacturing sector, which is a critical component of its economy. By maintaining open channels of communication, India aims to foster a favorable trade environment that benefits both nations.

Political tensions between the United States and Arab countries continue to be influenced by the ongoing instability in the Middle East, particularly in relation to the Gaza-Israel conflict. However, the recent trade policy introduced by the United States is not expected to escalate into a full-scale trade war with Arab nations. Most countries in the region are currently facing a minimum tariff of 10%. This level of tariff is unlikely to provoke substantial retaliatory measures or reciprocal tariffs from these nations. Instead, the Gulf Cooperation Council (GCC) countries may opt for diplomatic negotiations to address their concerns.

Several countries, including Switzerland (31%), Japan (24%), South Korea (25%), Australia (10%), and New Zealand (10%), possess significant capabilities to implement retaliatory measures. However, given their political, economic, and social relationships with the United States, as well as the potential repercussions of trade wars on their economies, these nations may opt for negotiation rather than enacting reciprocal tariffs.

• Assumption Number #2: The win-win effect of Tariff for the US

Tariffs are regarded as a protectionist strategy to limit competition, allowing domestic companies to flourish by exploiting cost differences to increase production, employment, earnings, and tax contributions to the government. This could create a win-win situation for the US administration. This assumption relies on the idea that foreign companies desperately need access to the US market and therefore cannot afford to boycott or replace the American consumer base. The belief is that companies significantly affected by the tariffs will prefer relocating their manufacturing to the US rather than targeting new markets. Let's explore the scenarios below;

Responses of International Companies and Nations to Assumption 2

Since 2020, the global landscape has undergone significant changes. New alliances have formed, and several key developments have altered the dynamics of international relations and economic interactions. This section describes how international companies and nations might react to these changes.

1. Strengthening Alliances

In response to the growing influence of nations like China and the expansion of BRICS+, countries may aim to reinforce existing alliances or establish new partnerships. These alliances can facilitate trade, enhance security, and promote collaborative economic strategies.

2. Economic Integration

With the full economic integration of BRICS+ nations and their expansion from five to ten members, international companies might diversify their supply chains and investment strategies to align with these emerging markets. This could involve increased investment in BRICS+ countries, tapping into new consumer bases and resources.

3. Intra-African Trade Initiatives

African countries have made significant progress in boosting intra-African trade through the African Continental Free Trade Area (AfCFTA), completing about 95% of the negotiations on Rules of Origin. International companies might explore opportunities in Africa, leveraging reduced trade barriers to access new markets and foster regional partnerships.

4. Adapting to European Influence

The European Union (EU) has become economically stronger and more influential globally. In response, international companies may adjust their strategies to comply with EU regulations and standards, ensuring competitiveness in this significant market. This could include investing in sustainable practices and innovation to align with the EU's focus on environmental and social governance.

5. Geopolitical Strategies

As nations reassess their geopolitical strategies due to these developments, international companies may need to navigate complex political landscapes. This could involve engaging in risk assessment and developing contingency plans to mitigate potential disruptions caused by geopolitical tensions.

In summary, international companies and nations are likely to adopt a multifaceted approach in response to the evolving global landscape, focusing on strengthening alliances, enhancing economic integration, and adapting to new market realities. BRICS+ nations account for half of the global population and two-fifths of international trade, indicating a significant shift in global trade dominance compared to the G7. China's progress through its Belt and Road Initiative has bolstered economic, political, and trade connections with countries in the Global South, positioning itself as a credible alternative to the US's economic influence.

The US, with a GDP per capita of $81,695 in 2023, remains the world's largest consumer spending market, compared to China's $12,959 and the EU's EUR 38,130 during the same period. Many producers are drawn to export to the American market despite tariffs and may even consider setting up production plants in the US. However, this could be challenged if countries begin negotiating with the US administration by offering counter proposals on trade deals, reducing tariffs, dismantling trade barriers to enable "fair" access for American goods into their countries, and developing new trade partnerships with the US for mutual benefits.

This might lead the US to reduce or remove tariffs, restoring stability in global supply chains. This could be the strategy of the most vulnerable countries in the short term.

However, in the medium to long term, due to the unpredictability of trade relations with the US government, many countries might seek new trade partners, new markets, and form new alliances with other nations. BRICS+ membership may increase over the next 2 to 4 years as countries look for viable options to secure stable trade partnerships and absorb any future shocks from new US trade policies. Some countries and blocs may also aim to enhance intra-regional or continental trade with neighbors; for example, ASEAN, ECOWAS, AfCFTA, EU, GCC, etc.

• Assumption Number #3: Tariffs will bring back industries and manufacturing jobs to the US

Already, several automotive companies have announced significant investments to set up new plants or expand the existing productions in the US. It should be noted that most companies left the US to produce in other countries such as China, Africa, India, Vietnam, Thailand, EU etc. mainly because of some of these factors:

1. Lower production Cost including cost of skilled labour

2. Existing Economies of scale to produce specific products

3. Availability of raw materials and proximity to source

4. Favourable taxes and regulations

5. And advantages on exchange rate capital gains

   
   

Tariffs alone may not be sufficient to lure most of these companies back to the US. For example, Apple has multiple production plants in China, Vietnam, India and Thailand. It may cost Apple a lot more in the long run to move all critical components of their manufacturing to the US than what they stand to lose under tariffs in the short run. Most companies like Nike, Nvidia, Tesla, Boeing and Microsoft have significant manufacturing plants located in Europe, China, Indonesia, Cambodia, Taiwan, India and Vietnam. Other major retail companies such as Amazon and Walmart relies heavily on sourcing products from China. There are no surprises that over $5 trillion in US stock market value have tanked since the introduction of tariffs on this critical global supply chains.

Tariffs maybe a catalyst to encourage companies to reinvest and produce from the US, but other economic policies may be necessary for these countries to sustainably compete with other manufacturing companies globally.

The Economic Impact on Developing Countries

The economic repercussions of US reciprocal tariffs on developing nations are significant. Many of these countries rely on exports to the US for economic growth and job creation. When tariffs increase, the cost of exporting rises, diminishing their competitiveness compared to US producers.

For instance, the World Bank reports that countries in Africa and Southeast Asia, which primarily export agricultural products and textiles, have experienced up to a 30% decline in sales to the US due to higher tariffs. This situation affects countless livelihoods, with millions depending on industries like agriculture and textiles for their income. Some additional impacts are discussed below:

Reshaping Global Supply Chains

1. The introduction of differential tariffs based on the trade deficit levels between countries and the US means that some countries’ exports are more affected than others. For example, a 40% tariff on Country A makes their exports of certain commodities 40% more expensive than those from Country B, which faces a 10% tariff. This allows Country B to compete more effectively against Country A’s exports in the US market, thereby reducing competition from Country A (ceteris paribus).

2. Countries with smaller trade deficits with the US (and thus facing 10% tariffs) are better positioned to leverage the tariff rate differences to boost their trade with the US while maintaining existing trade partners and alliances.

3. Companies in higher tariff rate categories that heavily depend on the US consumer market may choose to relocate their manufacturing plants to the US or to countries with lower tariff rates to maintain their market share and ensure business growth.

4. American companies are somewhat shielded from the effects of the tariffs; however, tariffs on raw materials for manufacturing in the US could hinder the competitiveness of American manufacturers. Both US and foreign companies will evaluate the cost-benefit scenarios of establishing plants in low-tariff countries where raw materials are available and affordable versus manufacturing in the US, considering the impact of tariffs on manufacturing inputs and raw materials.

   
   

Boosting Global Trade Competition

1. Many countries are likely to negotiate with the United States to explore options for significantly reducing or eliminating tariffs. This suggests that nations with substantial trade surpluses with the US and higher tariffs may lower or remove existing tariffs and barriers on US imports. Such actions would create opportunities for US goods to compete effectively in the global market, potentially increasing competition among US, Chinese, and EU companies.

2. This increased competition could lead to a significant shift in global trade patterns, as China and the EU currently dominate global trade volumes. US companies may aggressively target these emerging markets by offering competitive prices and high-quality products to counter both domestic and international competition.

3. If countries such as India, Indonesia, Vietnam, as well as nations in Africa and the Middle East, were to reduce or eliminate all tariffs and trade barriers, US companies could gain access to a market of over 2 billion people and a combined GDP in the trillions of dollars.

Development and Enhancement of Regional Trade and Economic Partnerships

1. Countries and businesses that are heavily reliant on the US consumer market are likely to face significant challenges, as increased tariffs will elevate the cost of their exports based on their country of origin.

2. This scenario will prompt a reevaluation of trade strategies, fostering the formation of new alliances. The BRICS+ group may see an increase in membership applications, as it is perceived as a viable pathway for countries seeking economic stability and predictability.

3. Continental and regional organizations such as the European Union (EU), Association of Southeast Asian Nations (ASEAN), Economic Community of West African States (ECOWAS), Gulf Cooperation Council (GCC), and the African Continental Free Trade Area (AfCFTA) may prioritize enhancing intra-regional trade within their respective blocs to mitigate any loss of market share and profitability resulting from the tariffs.

4. China may take proactive measures to further open its economy and transition from an export-driven model to a consumer-oriented economy. This shift could attract more interest from Global South countries, leading to the establishment of favorable trade relations and agreements, thereby increasing economic dependence on the Chinese market.

Impact Analysis on the African Continent and Countries

It is well-established that African countries primarily engage in trade with external partners such as China, the European Union (EU), and the United States (US), rather than with each other. According to the US Census Bureau, Africa's trade in goods with the US reached $39.5 billion in 2024. In comparison, trade with the EU amounted to €170.75 billion in 2023, while China's trade volume with Africa was substantial at $295 billion in 2024. Despite the significant trade with China, African nations faced a trade deficit of nearly $62 billion. Conversely, they enjoyed a trade surplus of $7 billion with the US and €8.25 billion with the EU in 2023.

The implementation of tariffs could be beneficial in promoting further integration among African countries, thereby enhancing intra-African trade through the African Continental Free Trade Area (AfCFTA). This initiative aims to leverage the existing trade capacity of over $3 trillion in GDP. However, it is important to note that tariffs may also lead to a decrease in trade volumes between Africa and the US, despite the provisions of the African Growth and Opportunity Act (AGOA).

In analysing trade volumes, African countries could significantly benefit by prioritizing trade with the EU, where trade volumes are notably high and where African nations typically experience trade surpluses. While awaiting the full operationalization of the AfCFTA, many countries may consider shifting a considerable portion of their trade activities towards the EU and China.

Analyzing the Impact on US-Ghana Trade Relations

Ghana benefits from various trade partnerships and preferential trade agreements, including the Economic Community of West African States (ECOWAS), the African Continental Free Trade Area (AfCFTA), and the EU-Ghana Trade Partnership Agreement, in addition to the African Growth and Opportunity Act (AGOA).

According to data from the Ghana Statistical Service (GSS), in 2024, Ghana imported goods from over 211 countries and exported to 155, highlighting its diverse trading patterns. However, 83.4% of all exports, totaling $17.18 billion, were concentrated in three primary products: gold, mineral fuels (oils), and cocoa beans (and products). This concentration reflects Ghana's heavy reliance on raw material exports and the technological limitations in adding value to these commodities. The distribution of export markets for Ghanaian products is as follows: Asia (38.3%), Europe (33.5%), Intra-Africa (20.2%), North America (5.8%), and others (2.2%).

Ghana has maintained a long-standing trade relationship with the United States since 1999, marked by the signing of the Trade and Investment Framework Agreement. This agreement facilitates discussions on trade and investment issues between both parties in a spirit of friendship and cooperation. Additionally, a Free Trade Agreement was established with the US through AGOA, which offers quota-free, duty-free, and tariff-free access to the United States for specific items under the trade agreement.

In 2024, the total trade in goods between Ghana and the US reached $2.1 billion, accounting for 5.5% of Ghana’s total trade volume. Exports were valued at $1.2 billion, while imports stood at $967.3 million, resulting in a moderate trade surplus of $232.7 million. The main exports to the US market include crude oil, cocoa beans and paste, and garments, whereas Ghana imports cars, refined petroleum products (including petrol and diesel), rubber, soybeans, and heavy-duty machinery.

Potential Impact of US Tariffs on Ghana’s Exports

On April 3^rd, 2025, the US administration imposed a 10% reciprocal tariff on Ghana, effective from April 5^th, 2025. Analyzing Ghana’s trade volumes with the United States in relation to the total trade volume of 2024 suggests that the tariffs will have a minimal overall impact on Ghana’s exports. Notably, key products such as crude oil (energy) and gold (critical minerals) are exempt from these tariffs, as stated in Annex II of the new trade policy. This exemption indicates that approximately 80% of Ghana’s trade with the US is not subject to the 10% tariffs.

However, certain products, including garments and cocoa beans (and their derivatives), are affected by the new tariff despite the African Growth and Opportunity Act (AGOA) provisions. In 2024, Ghana exported $40.2 million worth of apparel and $218 million worth of cocoa beans (and related products) to the US market. These items previously benefited from zero tariffs under AGOA until the introduction of the 10% tariff. As a result, Ghana’s apparel and cocoa exports will now incur a 10% increase in cost in the US market.

Despite this challenge, the impact is manageable. Competitors also face 10% tariffs, with some experiencing tariffs as high as 50%. Ghanaian companies have the opportunity to enhance production efficiencies to minimize waste, which is a significant factor in the manufacturing costs of apparel and cocoa beans (and their products). By optimizing production processes, Ghanaian exporters can offset losses or absorb the 10% tariff, thereby maintaining competitiveness in the US market.

Potential for Opportunities

Although trade volumes between Ghana and the United States are currently low, there exists significant potential for Ghana to capitalize on opportunities arising from the introduction of tariffs. Ghanaian companies should monitor developments related to tariff applications, identify potential market openings, and devise strategies to profitably exploit these gaps. In the short term, companies worldwide may restructure their supply chains to focus on opportunities in countries that are less affected by the tariffs.

Ghanaian companies might consider substituting exports from firms that may exit the US market due to higher tariffs or explore opportunities for partnerships with such companies to produce goods in Ghana for export to the US. Additionally, the Government of Ghana can leverage the restructuring of global supply chains following the imposition of tariffs by implementing favorable trade and investment policies. This approach will help attract potential investors, businesses, and trade partners that depend on the US market for growth.

Policy Recommendations for the Government of Ghana (GoG)

1. The GoG should amend or introduce new trade and investment policies that offer incentives to attract investors and trade partners to relocate and produce in Ghana, with a specific focus on targeting the US market.

2. The GoG could incentivize Ghanaian companies to invest in advanced manufacturing technologies to enhance production efficiency and quality, thereby making Ghanaian products more competitive and appealing to the US market.

3. Ghanaian companies should seek trade partnerships with global leaders in countries that have been severely affected by recent economic challenges. This integration into their supply chains can facilitate value addition and subsequent exports to the US market.

4. The GoG could consider the elimination of tariffs and non-tariff barriers on certain categories of US products. This would help harmonize trade balances between Ghana and the US, benefiting both nations.

5. Ghana should diversify its production and export products by focusing on non-traditional and high-end modernized items that can effectively compete in the US market. Emphasizing high-tech production could significantly transform the economy and strengthen trade partnerships with the US.

Trade Diversification as a Strategy

Facing the mounting pressure of US tariffs, developing countries are exploring trade diversification. By seeking new markets and lessening dependency on the US, they can reduce risks associated with unpredictable tariffs and trade policies.

For example, nations in Latin America and Africa have started pursuing trade agreements with other regions. According to the United Nations Conference on Trade and Development (UNCTAD), developing countries that diversified their trade partnerships saw a 15% increase in export earnings in 2021. These new partnerships with the European Union or Asian nations provide vital alternatives, helping stabilize their economies amid evolving US trade policies.

The Role of International Organizations

International organizations are essential for aiding developing nations as they navigate global trade complexities. Entities like the World Trade Organization (WTO) and the International Monetary Fund (IMF) offer resources, guidance, and frameworks for trade negotiations.

These organizations help developing countries advocate for fair trade practices and resolve disputes arising from tariffs. By fostering collaboration and dialogue, they work toward a more equitable global trading system, benefiting all nations, regardless of their economic standing.

Emerging Global Trade Threats

Beyond US reciprocal tariffs, developing countries face several global trade challenges. These include rising protectionism in other nations, trade wars, and geopolitical tensions that can disrupt supply chains. The COVID-19 pandemic further intensified these issues, revealing the weaknesses in global trade networks. For example, a report from the World Economic Forum indicated that 75% of countries experienced significant disruptions in trade flows during the pandemic.

As nations prioritize domestic production and self-sufficiency, developing countries may struggle to access markets and resources. This shift may lead to a more fragmented global economy, making it increasingly challenging for these nations to compete internationally.

The Importance of Resilience and Adaptability

To succeed in this tougher environment, developing nations must build resilience and adaptability. This calls for investments in infrastructure, technology, and education. By promoting innovation and enhancing productivity, these countries can strengthen their positions in the global market.

Moreover, establishing robust domestic industries can reduce reliance on exports and promote a balanced economy. Governments can facilitate this transition by implementing policies that encourage entrepreneurship and foster investments in crucial sectors.

Path Forward for Developing Countries

The effects of US reciprocal tariffs on developing nations present a complex issue that needs careful planning. As these countries navigate the hurdles introduced by tariffs and emerging global trade threats, it is vital to focus on diversification, collaboration, and resilience.

By forming strong trade partnerships and investing in their economies, developing nations can lessen the risks associated with shifting trade policies. A more equitable global trading system will ultimately benefit developing countries and the broader international community.

A vibrant market showcasing diverse textiles and goods

Written on April 9th 2025