Former Vice President Dr. Mahamudu Bawumia has expressed his concerns regarding current global policymakers, emphasizing their neglect of essential historical and economic lessons, particularly about trade imbalances.
He articulated these views in response to inquiries about the weaponization of trade and its repercussions on African economies, notably Ghana, as well as potential strategies to bolster the continent’s economic resilience during the International Democracy Union (IDU) Forum held in Brussels on Saturday, May 17. Dr. Bawumia remarked, ‘One significant issue with contemporary policymakers is their failure to grasp historical and economic lessons when addressing trade balances.’
He further warned against oversimplified solutions like tariffs, asserting that trade deficits stem from deep-seated macroeconomic factors rather than mere policy shortcomings.
He highlighted that Africa’s share of global trade is merely 2.5% for exports and 2.9% for imports, in stark contrast to Asia’s 43% of global exports and 38% of imports, Europe’s 38% and 51%, and the U.S.’s 8% of exports and 14% of imports. He concluded that these disparities are substantial and cannot be remedied through tariffs.
He articulated that trade deficits arise from an imbalance between national savings and investments, referencing the national income identity as a fundamental economic concept. He stated, ‘A nation that expends more than it saves will inevitably incur a trade deficit.
This is a macroeconomic concern rather than a trade policy matter.’ Drawing on historical examples, Dr. Bawumia highlighted the Smoot-Hawley Tariff Act of the 1930s, which enforced 20% tariffs and played a role in the Great Depression, as well as the U.S.–China trade conflict of 2018–2019, which disrupted global trade dynamics.
He expressed apprehension regarding recent increases in U.S. tariffs, pointing out that the average rate has escalated from 2.4% to 10% — the highest level since 1943. Although Africa is less vulnerable than other regions, Dr. Bawumia cautioned that certain nations, such as Lesotho, which depend significantly on textile exports to the U.S. under the African Growth and Opportunity Act (AGOA), may face dire repercussions.
‘When 50% of your exports are jeopardized, the consequences will be substantial,’ he remarked.
