By Hassan Buba
Since President Donald Trump of the United States (US) returned to office, he has introduced a sweeping global program of import tariffs, and threatened many more. The rates at which these taxes are charged vary widely. Goods from certain countries with which Trump has political grievance are subject to particularly high rates. Goods from other countries face lower rates if Trump has struck deals with them.
Tariffs are taxes charged on goods bought from other countries. It is a percentage of a product’s value, meaning that American buyers of many goods will have to pay more for them.The US president wants to reduce the gap between the value of goods the US buys from other countries and those it sells to them, known as the trade deficit. He argues that America has been taken advantageofby ‘’cheaters,’’ and ‘’pillaged’’ by foreigners.
The taxes on goods imported to the US include 50% tariff on steel and aluminum imports, 50% tariffs on copper imports, 25% tariffs on foreign-made-cars and imported engines, and other car parts. On July8, Trump threatened to impose a 200% tariff on pharmaceutical imports. The US president has also said the global tariff exemption covering goods valued at $800 or less will end on August 29 this year.
At the end of May, a US trade court ruled that Trump did not have the authority to impose some of the tariffs he had announced, because he did so under national emergency powers. But the following day, an appeals court said the relevant taxes could stay in place while the case continued.
Launching the first tariffs of his current term against China, Mexico and Canada, Trump said all three countries must do more to stop migrants and illegal drugs reaching the US. He also indicated that the threat of tariffs was intended to pressure China into using its influence to end the war in Ukraine.
However, Trump’s volatile international trade policy has thrown the world economy into chaos. The International Monetary Fund (IMF) has warned that higher tariffs and more uncertainty could lead to weaker growth and slower economic activity in the world.Analystsaffirm thatTrump’s tariff war is leading to a weakening of the dollar, and accelerating the separation of the West and the developing countries of the Global South in the financial and economic sphere.
Observers point out that it is alsopromoting the formation of alternative payment systems and the transition to settlements in national currencies, though this will require an increase in gold purchases for countries’ gold currency reserves.
The IMF is clear that the US tariffs on most trading partners will be harmful to global growth. Pierre-Olivier Gourinchas, IMF’s Chief economist, said the tariffs will reduce activity and gradually it will also translate into higher prices in the US. Trump’s unpredictable tariff policy and countermeasures by America’s trading partners will likely deal a heavy blow to economies worldwide with US prosperity hit particularly hard, the IMF said.
The IMF seems helpless in the face of Trump’s tariffs. The latest World Economic Outlook was put together under ‘’exceptional ‘’ circumstances, said the IMF. Trump’s unveiling of sweeping tariffs on April2 ‘’forced us to jettison our projections – nearly at that point,’’ it wrote. Similarly, Gourinchas reportedly said ‘’We’re entering a new era as the global economic system that has operated for the last 80 years is being reset.’’
It is now evident to that the IMF is the US hand ruling the world, because it has significant influence within the institutiondue to its large financial contributions, and so has the veto power.
This allows the US to exercise a de factor veto over key decisions as a significant majority of votes is required for certain reforms. Critics argue that the reality is that the voting structure is unequal among the 191 member nations and can undermine borrower nations’ sovereignty.
The ActionAid’s report entitled ‘Fifty Years of Failure: The IMF Debt and Austerity in Africa’ is based on a research and personal testimonies from across 10 African countries including Nigeria. The report documents how the IMF imposes austerity policies, undermining health, education, and wider development across the continent. Rather than seek systemic solutions to the mounting debt crisis in Africa, and rather than exploring obvious alternatives such as progressive tax reforms, the IMF continues to enforce cuts to public spending that hurt women and disadvantaged groups most acutely.
Despite following the IMF’s advice for decades, 19 of Africa’s 35 low-income countries are in debt distress or facing a high risk of debt distress. The amount African governments are forced to spend on interest payments is often higher than spending on either education or health. Yet there is no serious effort being made to find a systemic solution to the debt crisis.
Countries have to negotiate on a one-by-one basis as if the fault is all theirs and the people who end up paying the price tend to be those who have the least. Matters are made worse by the fact that African countries still have very little to say in decision-making in the World Bank and the IMF with less than 10% vote share in the IMF board – and the 46 countries in sub-Saharan Africa are represented by only two executive directors. There is need now for developing countries to seek the formation of alternative payment systems and transition to settlements in their national currencies.
Trump’s tariffs now have replaced diplomacy as other US tools of statecraft are discarded. Measures meant to rebalance American economy are wielded instead against the likes of Canada, India, Brazil and others to compel loyalty to the president of the United States.