Kenya could get caught up in the escalating trade war between the US and China

September 3, 2019 Newsroom

That the US-China trade war has escalated and has now morphed into a ‘cat and mouse game’ is no news.

In August this year, top negotiators from both countries met in Shanghai China, to iron out a deal aimed at ending the nasty trade war that is threatening global economic prosperity.

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However, the brief meeting yielded no resolution and there seems to be none in sight! at least for now.

That scenario has been mirrored in the number of billions of dollars in tariffs that both economies (US and China) have imposed on each other’s goods. The US alone, so far, has slapped tariffs on some $250bn (£204.5bn) of Chinese goods. And China hit back with tariffs on $110bn of US products.

While the two superpowers engaged in a ‘bruising trading war’, it is the ‘proverbial grass’ that will suffer. Smaller economies like Kenya are bearing the brunt slowly, but painfully!

Kenyan tech suppliers, shoemakers, and chemical firms stand to lose the most. But how does the future of this trade war look like? Both economies have threatened to take more action with new tariffs and hikes to existing duties in the coming months.

The ripple effects of these wars have landed home, albeit, with a bang!. In May this year, through an executive order, US President Donald Trump threw Kenya in a dilemma when he ordered US companies to immediately cut off the supply of crucial software and hardware components to Chinese Tech giant Huawei. A company with a strong footprint, not only in Kenya but Africa, providing crucial communication services even for governments.

In Kenya, the Chinese tech giant is Kenya’s largest telecommunications equipment provider and a lifeline for mobile network operators among them; Safaricom, Airtel, and Telcom Kenya.

In the event they go ahead with tough measures on each other, there will be only two seniors. Both economies might explore other markets albeit with ‘friendly tariffs’ in sub-Saharan Africa or other Asia economies. Whether this step will be gainful or detrimental to them is still debatable.

But the gospel truth is that Kenya and other Africa nations and the private sector, who view the US and China as important development partners-will be nosing and salivating for more deals from both economies.

The choices might be between growth in borrowed liquidity or with ‘friendly tariffs’ with an aim of winning big construction contracts in return, but one thing is for sure if the war continues-the commodity market will suffer a great deal.

Amid this kerfuffle, commodity-driven nations, particularly oil producers like Kenya, which recently joined the league of oil-exporting nations, stands to gain from the trade war, as it may encourage self-reliance.

Secondly, it will also make Kenya a vital partner for the two nations as they advance their interests in Africa. But in it all, it is the looming job losses and economic hardship that is staring at developing countries like Kenya.