As the US President Donald Trump continues to reel out additional measures for the purposes of ensuring that the America is not giving undue advantage to her trading partners in terms of liberalized import duties, analysts at Meristem Securities, one of Nigeria’s investment consulting firms, have projected that the current tariff war between the US and China would have a spillover effect on the Nigerian economy.
A few days ago, the Donald Trump administration announced a 25% additional tariff on imports from Canada and Mexico and a 10 per cent additional tariff on imports from China.
As a retaliatory step, China announced a 15% import tax due to be placed on US coal-liquefied natural gas and the import of cars.
The Chinese government has also filed a formal complaint with the World Trade Organisation (WTO) and banned the exports of five major metals (tungsten, indium, bismuth, tellurium, and molybdenum) to the US. Additionally, they
Specifically, Meristem Securities in its just published macroeconomic update report titled ‘The US Tariff Hikes and Its Expected Impacts’, predicted that the lingering face-off between the US and China could worsen Nigeria’s bilateral trade deficit with China.
On how the US-China tariff war could worsen Nigeria’s trade deficit with China, experts at the firm projected: “With the potential redirection of more exports toward Nigeria, imports from key trading partners, particularly China, could rise further, exacerbating Nigeria’s existing trade imbalance with China. This could widen the trade deficit, which already stood at NGN 7.52 tn (with China). A sustained increase in import inflows without a corresponding rise in exports may place additional pressure on Nigeria’s external reserves, heightening currency depreciation risks and worsening trade imbalances over the medium term.
“Additionally, an escalation in these trade tensions could increase investors’ risk aversion. These scenarios could lead to reduced capital flows to emerging and frontier markets, as investors might be drawn to safer havens offering attractive returns and the appeal of a stronger currency.
“Increased domestic production in the US could boost demand for the US dollar, further strengthening the currency in global markets. A stronger dollar would raise the cost of imports for Nigeria, exerting additional pressure on the naira and potentially accelerating its depreciation.
“This could undermine expectations of exchange rate stability, especially if capital inflows decline (and/or outflows intensify), leading to liquidity constraints in Nigeria’s foreign exchange market. In such a scenario, the country could experience renewed foreign exchange volatility, complicating the Central Bank of Nigeria’s efforts to stabilise the currency”, the analysts added.
Similarly, they expressed concern about the implications of the US-China tariff war for Nigeria’s fixed-income market as higher interest rates in advanced economies, driven by potential inflationary pressures, could reduce capital inflows into Nigeria’s fixed-income market.
The analysts maintained: “Additionally, attractive rates in these economies might encourage capital outflows from Nigeria’s fixed-income market, particularly from foreign investors holding Nigerian bonds. This could lead to rising bond yields as prices decline.
“A likely uptick in domestic inflation due to elevated imported, and the risk of significant outflow from the local fixed-income market could prompt Nigeria’s monetary authority to adopt a less accommodative monetary stance, potentially adjusting yields to make the market more attractive, sustain investor interest, and support exchange rate stability,” they added.
Available data from the National Bureau of Statistics (NBS) on Nigeria’s ‘Foreign Trade in Goods Statistics – Q3, 2024’ showed that though China remained Nigeria’s highest trading partner on importation, accounting for 24% of the country’s imports, the bilateral trade deficit was very huge for Nigeria.
As of Q3 2023, NBS data revealed that the trade deficit between Nigeria and China stood at N7.54tn.
Speaking in Abuja at the 2025 Chinese Lunar New Year celebration at the Chinese Cultural Centre, the Chinese Ambassador to Nigeria, Yu Dunhai, disclosed that the trade volume between Nigeria and China exceeded $20 billion in 2024.
In confirmation of the lopsided bilateral trade between his country and Nigeria, the Envoy said: “Nigeria is the country where China has the largest engineering contract, the second largest exporting market, and the third largest trade partner for China in Africa.
“2024 was a successful year for the two countries, the climax of the success being the elevation of the two countries’ bilateral relations to a comprehensive strategic partnership by President Bola Tinubu when he visited China. 2025 will be a lot better”, Dunhai added.
