US import tariffs and global trade: Implications for Ghana

Tariffs are financial levies applied to products upon or as a result of their importation.

Access to foreign products can be impeded by various rules, including customs duties (tariffs), quantitative restrictions (quotas), and other non-tariff barriers like customs processes, technical rules, and sanitary and phytosanitary measures.

Market access is contingent upon the payment of requisite tariffs.

Consequently, tariffs constitute the sole weapon of protection typically permitted by WTO rules.

The announcement by President Donald Trump on April 2, 2025, on a fresh array of import tax/tariff measures has elicited diverse reactions and expectations worldwide.

We anticipate that this modification in the US's trade policy will significantly impact developing nations, particularly Ghana. 

This current tariff regime appears to be a resurgence of the trade conflict that originated during the initial term of the Trump administration with China.

The US perceives this action as a strategy to increase costs for American companies and consumers when acquiring foreign goods.

We anticipate that this action will boost and energise local businesses and entrepreneurs in the US. 

This action is anticipated to adversely affect both international trade partners exporting to the US and domestic US enterprises dependent on imports for production and consumption.

There is considerable expectation that the US may endure severe repercussions due to a slowdown in its economy, potentially leading to a recession.

The implication cannot be considered to affect just foreign corporations.

Nevertheless, the US possesses the ability to mitigate its share of the effects with legitimate subsidies and other countervailing measures allowed under WTO regulations.

Several nations

Several nations have already implemented reciprocal principles for US-exported goods in their markets, and others are anticipated to follow suit by imposing analogous tariff measures to obstruct US trade flow.

The ramifications for international investment include the uncertainty these acts signify for growth and integration. Global investment volatility is plausible amid these tensions, as corporations consider divestitures to mitigate losses in the investment markets and equities.

The implementation of a 10 per cent tariff on Ghana's exports, particularly raw materials and garments to the US, may result in severe consequences for Ghanaian enterprises and the whole economy. One implication is diminished export competitiveness.

This implies that Ghanaian goods entering the US market will be costlier than comparable products from nations with similar manufacturing capacities that are not subjected to equivalent tariffs.

Such an outcome may lead to diminished demand for Ghanaian exports in the US and a potential erosion of market share for Ghanaian companies, particularly in industries such as cocoa, textiles, and processed foods.

Secondly, the strain on Ghana's foreign exchange may escalate.

Undeniably, the US is a significant trading partner of Ghana.

This suggests that any decrease in exports due to this action is likely to lead to a loss in foreign exchange inflows.

The impending pressure on the Cedi may result in currency devaluation and inflation stemming from heightened costs of imported goods.

Moreover, as shown in the days after the announcement, any trade move and its corresponding reciprocal action from Ghana might exacerbate policy and diplomatic tensions between the two nations.
 

Tariff adjustment

This tariff adjustment may strain commercial and diplomatic relations between Ghana and the US, potentially prompting the Ghanaian government to contemplate retaliatory actions or pursue redress through trade discussions under WTO regulations.

A more gentle approach is to promptly enhance Ghana's domestic industry policies to diminish dependence on conventional exports.

Ghana should promptly implement these trade policy steps to mitigate the effects of the 10% tariff imposed by the US on its exports and overall economy.

The government must improve its policies regarding import substitution, value addition, and product diversification. 

This can be accomplished via export enhancement strategies that transition from raw or semi-processed exports to high-value finished products, potentially attracting less stringent tariffs or qualifying for distinct tariff classifications under the US 2025 Harmonised Tariff Schedule (HTS), which delineates applicable tariff rates and statistical categories for all merchandise imported into the US. 

Secondly, despite the sluggish progress of the AfCFTA in fulfilling its primary goals of African markets integration within the established timelines, it remains crucial for Ghana to capitalise on this initiative promptly to diminish its reliance on external markets, such as the US, for product exports.

Commercial policies should focus on enhancing Ghana's exports under the AfCFTA and strengthening additional commercial links through South-South cooperation, which may offer more advantageous conditions.

Effectively negotiated bilateral trade agreements with nations with greater demand markets, excluding the US, for preferential market access will mitigate the effects of US policy. 

The government's initial endeavour at diplomatic dialogue with its U.S. counterpart is praiseworthy.

When necessary, the country will have no choice but to continue trade talks to seek an exemption or a review of the tariff, especially if the affected goods are part of special access programmes, such as AGOA.

The writer is a Lecturer in International Trade Law at UCC and UGSoL, and Consultant on Trade and MSME Finance at CATIPs-Ghana.