By Richard Itaman, Lydia Adeoye and Oluwafemi Awopegba
INTRODUCTION
President Trump on assumption of office as the 47th President of the United States of America passed a blizzard of executive orders which ricocheted across the world with myriads of implications that is still being unravelled by policy makers and analysts. These executive orders have been motivated by the intention to vigorously shift American foreign policy focus to protecting its interests. According to the President, taxpayers’ money should not be used to advance non-US agenda. While the executive orders have been greeted with mixed reactions in and outside the US, emphasis has been placed on the potential boomerang effect on US soft power globally with little policy direction for other countries as they scuffle to respond to the executive orders.
We analyse those executive orders that seem to have immediate impact on development in African countries and explore their implications including offering suggestions on how policy makers across the continent may respond to them.
IMPACT OF THE EXECUTIVE ORDERS ON AFRICAN DEVELOPMENT
International Trade
We start with the executive order on trade, aimed at promoting investment and productivity, enhance America’s industrial technological advantages and defend its economic and national security, and benefit manufacturers, farmers and businesses. Its aim is to address what President Trump refers to as unbalanced and unfair trade and deficits, using global supplementary tariffs, duties and other policies to boost foreign trade-related revenue. While these measures will be taken against countries that are believed to be currency manipulators in a bid to gain undue advantage against the USA, the measures will be used to negotiate agreements on a bilateral or sector-specific basis with countries “to obtain export market access for American workers, farmers, ranchers, service providers, and other businesses”.
Data from the US Bureau of Economic Analysis (Figure 1) shows that even though the USA has the smallest trade with Africa, it still carries a trade deficit, which it is poised to address with the tariffs.
Figure 1: USA-World Trade Deficit 2023 ($Billions)
Africa’s positive trade balance with the USA can be credited to the African Growth and Opportunity Act (AGOA) signed by President Clinton in May 2000 with African countries. Despite contentions, the agreement was reviewed and extended till 2025 and has led to increasing rise in Africa’s trade balance with the USA (see figure 2). While the fate of AGOA was already in question before President Trump came into office due to the dynamics of a different trade environment in Africa as presented by the adoption of the African Continental Free Trade Area (AfCFTA), the executive orders make renewal of AGOA more challenging.
Figure 2: USA-Africa Trade Balance ($Billions)
Countries across the continent will be affected to different degrees depending on their level of trade integration with the USA. Of significant magnitude is the exclusions, exemptions and other import adjustments measures on steel and aluminium which poses threat to a country like South Africa, which exported $518.68 million worth of steel and iron to the USA in 2024 according to the COMTRADE database. Nevertheless, the shift in America’s foreign policy towards reciprocal relations means that the US is willing to engage in trade negotiations, but African countries must act together to command considerable influence in any negotiation.
The need for a united Africa in trade negotiations is reinforced by the fact that the African countries with the largest exports to the USA may however also have large trade deficits, as shown in figure 3.
Figure 3: Top 10 USA Export partners in Africa ($Billions)
It is noteworthy that the use of tariffs in President Trump’s foreign policy is not new, as countries’ trade negotiations and agreements have been struck on similar basis and reasons in the past, including with the USA, in a bid to incentivise compliance by foreign countries to existing trade agreements or as relates to matters of national security. However, as has been pointed out, President Trump may be approaching a 21st century problem with a 20th century solution, as trade tariffs hardly work within Global Value Chains where a country needs to import material input before they can export.
Development Assistance
There are other executive orders outside of trade that have implications for development across Africa. One of which is the decision to withdraw the USA from the World Health Organisation (WHO) in a bid to demonstrate independence from what it calls the organisation’s member states’ political influence and to stop the “onerous payment” which is “far out of proportion with other countries’ assessed payments”. While this revokes the leadership of the US on global health, it weakens the health systems in many African countries relying on the USA funding to tackle diseases such as HIV, tuberculosis, Malaria, Polio and others.
A 90-day suspension was also placed on USA foreign development assistance pending an assessment of programmatic efficiencies and alignment with US interests and foreign policy, on the claim that some of the aid even “serve to destabilise world peace by promoting ideas in foreign countries that are directly inverse to harmonious and stable relations internal to and among countries”. It is not only the USA that has reneged on its aid commitments. As reported in the Guardian, the UK has also recently under Sir Keir Starmer, the Prime Minister, slashed its “international aid budget by almost half to pay for a generational increase in defence spending”, bringing aid spending from 0.56% to 0.3% of national income.
The impact of these rollbacks in aid from the USA and UK have dire consequences on the lives of people in Africa who rely on them for survival. Although most of the USA aid which comes to sub-Saharan African countries, for instance, are more programme-based than direct budget assistance, this region is often the largest in terms of non-humanitarian assistance, running up to 35-40%, and this is expected to be affected by the new executive order. Data from PEW Research Centre shows that sub-Saharan Africa was the top regional recipient of US foreign aid disbursed in fiscal 2023 to public agencies and NGOs, with Ethiopia, Egypt, Somalia, Nigeria and Congo DRC among the top 10 recipients of aid to NGOs operating in individual countries, given $1.8 billion, $1.4 billion, $1.2 billion, $1 billion, and $1 billion respectively. The rollback of these aid could translate to an abrupt distortion of ongoing programmes and projects in these countries. As pointed out by Anneliese Dodd, former minister of International Development in her resignation letter to the UK PM, “ultimately, these cuts will remove food and healthcare from desperate people”.
Climate Change Mitigation and Adaptation and Global Tax Policy
What is more, the USA has also withdrawn from the Paris Agreement under the United Nations Framework on Climate Change and any attendant obligations. As such, it has revoked any purported financial commitment made by the USA to climate change mitigation and adaptation. This move, like the other executive orders, is said to help the USA grow its economy and maintain jobs for American citizens as it aims to unleash America’s affordable and reliable energy and natural resources and pursue energy exploration and production. It will also terminate the new green deal and disbursement of funds in the Inflation Reduction Act of 2022, the Infrastructure Investment and Jobs Act, including but not limited to funds for electric vehicles and charging stations.
The USA’s new approach to climate change adaptation and mitigation has overwhelming implications for African countries which depend on foreign investments to address the continent’s energy deficiency in a much more sustainable manner than the path taken by today’s rich countries as they move towards achieving their global net zero targets.
African countries have particularly been vulnerable with heavy reliance on corporate income tax, not least challenged by multinational corporations’ avoidance and the difficulty in enforcing tax regulations with the rise of digital businesses registered offshore. This problem has been compounded with the withdrawal of the USA from the OECD Global Tax Deal as it makes room for American businesses to disregard foreign tax policies.
IMPLICATIONS AND WAY FORWARD
The decision by the USA to rollback aid has already been welcomed by leaders in Russia. China’s growing influence in Africa will also increase with the USA’s withdrawal from the continent as it is well positioned to step into the vacuum that has been created. This would be met with mixed reactions depending on whether one thinks China’s increasingly growing presence in Africa has been a force for good or not. Evidence shows that about 60 percent of Africans have a favourable disposition to China’s presence on the continent based on its contribution to overall well-being, trust, social cohesion and less conditionality for development assistance.
The moves triggered by these executive orders signify a crumbling of the global postwar order. It also confirms long-standing scepticism around the workings of the dominant neoliberal economic order in which developing countries and poor communities in rich countries have been increasingly marginalised, as such, needs to be revisited. Many have been let down both in the USA and around the world while racism and nationalism are growing in response to this malaise. A re-construction of the global economy is necessary, now more than ever.
The proposal by South Africa’s minister of mining, Gwede Mantashe, who called on African countries to respond by withholding the sale of minerals to the USA portends a brewing trade war, and could increase the cost of mining production globally. Such a response will no doubt have debilitating effects on all sides, which President Trump may not have seen coming. But how might African countries respond? The withdrawal of USA aid and commitment to climate agreements require on the one hand, for governments to think strategically of how to respond to such nationalistic policies and out of character of global coordination and integration. It is surprising that African leaders are yet to come together to strategise on their response to these executive orders, as acting together would boost Africa’s negotiating strength with the USA and indeed, the rest of the world.
Surely, one element of a proposed reconstruction of the global economic order is a repositioning of African statehood in its relationship with the rest of the world. Rather than the continuous dependence on foreign handouts, African countries must think of harnessing their existing strengths and resources and negotiating with the rest of the world from a more coordinated vantage position. A more coordinated approach would require more strategic partnerships that allow more room for flexibility in negotiations. An example of this can be seen with China which strategically has been less dependent on the USA as an export market, giving it more room to adapt and respond to USA tariffs with manageable impact. The recent US foreign policy shift shows that President Trump is interested in such bilateral negotiations in his transactional approach, and agreements can be reached as long as the US stands to benefit in some ways.
The African Continental Free Trade Area AfCFTA) presents an opportunity for such repositioning of the continent. For AfCFTA to work efficiently, the richer African countries must take more responsibility in ensuring that the poorer countries level up as a way of securing a larger more economically sustainable African market. This would mean first, being more fiscally responsible and ambitious domestically and ensuring more predictable market conditions.
CONCLUSION
The executive orders must serve as a wake-up call for African governments to structurally transform their economies from the production of low-value-added goods and services to high-value-added goods and services, and deliver greater socio-economic development. This way, they are able to move away from being recipients of handouts from the global North. The transition away from aid dependency in Africa will not be easy. It will require bolder public financing and fiscal reallocation that prioritises welfare areas in a bid to protect the gains made so far through foreign aid. At the same time, there is a need to incentivise private investments, linked to industrial policies that all come together within national and regional development plans.
Richard Itaman is Lecturer in Sustainability, Economics and Policy at the University of Leeds.
Lydia Adeoye is PhD Candidate In Economics at Heriot Watt University.
Oluwafemi Awopegba is PhD Candidate in Economics at the University of Manitoba.