The election of US president Donald Trump triggered the fragmentation of the global economy.
Firstly, the US announced a 10% tariff duty for all countries exporting to it, revoking some preferential trade agreements that had enabled other countries to export duty free.
Secondly, on April 2, the US introduced what it called “liberation day” tariffs, supposedly designed as reciprocal responses to countries running trade surpluses with America.
How those reciprocal tariffs were calculated remains contested, because the US administration only considered its trade deficit in goods while ignoring its surpluses in services trade.
The tariffs also excluded primary income payments such as dividends and interest remitted annually to US-based investors who had established direct and portfolio investments abroad.
In South Africa, for instance, it was observed that the country’s positive trade balance in goods with the US was partly offset by its deficit in services trade and primary income outflows to America.
Zimbabwe has been informed that it will be subject to a reciprocal tariff of 18% for most of its goods destined for the US. So far, critical resources such as Platinum Group Metals and chrome have been reported to be exempt. However, beyond these minerals, virtually every other commodity is set to face reciprocal tariffs, which came into effect on August 1 this year.
Various regions, including Brazil, China and the EU, have threatened retaliation by imposing stiffer tariffs on US exports destined for their markets.
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The danger is that such threats and counter threats, if implemented, are bound to slow global trade. If that happens, Africa will be among the worst affected, since 80% of the continent’s trade is linked to territories outside Africa. In contrast, only 20% of Africa’s trade happens on an intra-regional basis.
The EU, for example, conducts as much as 65% of its foreign trade within the bloc itself, giving it resilience as world trade fragments. Africa and Zimbabwe, however, do not enjoy that buffer. This makes it critical for Zimbabwe to consider possible strategies to avert economic decline as global trade slows.
Among alternatives within Zimbabwe’s reach, several options stand out. One is the operationalisation of existing trade agreements with other countries, particularly in agricultural produce and other affected products.
The Southern African Development Community (Sadc) already has a Free Trade Agreement (FTA), but its implementation has been weak.
Between 2013 and 2017, only 36% of eligible Sadc exports to Mozambique utilised duty free access under the FTA, meaning 64% of Sadc exports to Mozambique still faced tariffs similar to those imposed on exporters from outside Sadc. Addressing such inefficiencies could help Zimbabwe boost exports within the region.
Zimbabwe can also negotiate trade deals with non Sadc countries to expand agricultural market access. For example, it could target top agricultural importing countries in Africa and use those agreements to drive local production in specific commodities. This may be a responsive rather than pre-emptive approach, but it has potential to cushion the economy against global disruptions.
Africa itself has a significant agricultural trade deficit, with cumulative grain imports of around US$75 billion as of 2023. Egypt is the continent’s largest importer of cereals, fats, oils, meat, offal, oilseeds and oleaginous fruits, accounting for 24,7% of Africa’s cereal imports and 5% of global cereal imports.
Algeria accounts for 10,6% of Africa’s sugar and sugar confectionery imports and 1,5% of global imports in the same category. Nigeria leads in cereal and milk preparation imports, representing 11,4% of Africa’s total and 0,5% of global imports.
South Africa and Libya are also primary destinations for products in Africa’s most imported categories. Clearly, opportunities exist if Zimbabwe negotiates preferential access into these markets, especially for in demand products.
The same strategy can be applied to manufactured goods.
Zimbabwe should also push for the fast tracking of preferential trade areas (PTAs) still under negotiation, such as the Tripartite Free Trade Area that aims to consolidate Sadc, Comesa and the East African Community (EAC).
Alternatively, Zimbabwe could negotiate targeted market access for specific products, such as agricultural produce and manufactured goods, as a precursor to finalising broader PTAs. Such negotiations could be positioned as pilot models for eventual PTA operationalisation.
Zimbabwe could also offer mutual concessions to trading partners along the way.
Importantly, these early stage deals should focus on the removal of non -tariff barriers (NTBs) and technical barriers to trade (TBTs), with tariff removals following later.
It is not uncommon for NTBs and TBTs to prove more harmful than tariffs themselves, which is why Zimbabwe should prioritise addressing them.
The same approach could be applied in negotiations with China, which has already offered 0% tariffs on African exports. Precursor agreements centred on NTBs and TBTs could yield strong results.
A deliberate bias towards agro processed exports would be even more rewarding because data shows that for every tonne exported, agro processed goods can be three times more valuable than raw agricultural commodities.
At the World Trade Organisation (WTO), Zimbabwe can lobby developed and large developing economies to halt agricultural subsidies funded by their governments.
Such subsidies depress global agricultural prices, making it harder for poorer countries like Zimbabwe to attract private investment into local agricultural value chains or export their produce competitively.
Local producers are also undermined, as cheap subsidised imports out compete domestic products. Currently, the US and EU alone provide more than US$60 billion annually in subsidies to their agricultural sectors. WTO rules generally consider it illegal when government subsidies displace industries in other countries.
This principle should apply especially to developed economies that are not entitled to Special and Differential Treatment under WTO guidelines.
While agricultural commodities may sometimes be exempt from subsidy restrictions under certain interpretations of WTO rules, Zimbabwe’s government must press the issue to closure.
If such subsidies are eventually curtailed, Zimbabwe and other developing economies would be able to attract more foreign investment into local agricultural value chains and expand exports.
Zimbabwe can also leverage its critical minerals to earn additional government revenue or stimulate domestic manufacturing through local processing and value addition.
Working with other top exporting countries, Zimbabwe could impose export taxes on raw and refined chrome and PGM exports.
The extra revenues generated from these taxes could help the government expand its welfare role, cushioning citizens against the adverse effects of trade losses in a fragmenting global economy.
