U.S. tariff wars penalize Chinese development and African futures(2)

Disruptive changes in U.S. and Chinese trade and FDI

Since December 2018, the Trump administration's new "Africa strategy" has stressed three priorities: advancing U.S. trade across the region, combating terrorism and aid reduction in the name of efficiency. The first tenet is reflected by the 'Prosper Africa' initiative, whose stated goal is to substantially increase trade and investment between the U.S. and Africa.

Yet, to understand the real economic role of the United States and China in Africa, it is instructive to take a long view. Let's start with trade. Between the end of the Cold War and the onset of the Bush era, U.S. exports to and imports from Africa were less than $1 billion annually. Africa was non-existent to Washington. In the same time period, Chinese exports to Africa more than quintupled to $6 billion, whereas imports from Africa increased even faster, almost 10-fold to over $4 billion.

Prior to global crisis, U.S. trade soared to $100 billion, falling only $2 billion behind that of China. While Chinese trade with Africa was balanced, U.S. trade wasn't. America imported 2.5 times more from Africa than it exported to Africa.

Until the end of the commodity super-cycle and the collapse of energy prices, Chinese trade soared to more than $200 billion in 2015. After the subsequent plunge, it returned to $155 billion in 2017. Meanwhile, U.S. trade plunged to $50 billion and remains only $55 billion annually. China's trade surplus with Africa is about $35 billion, whereas U.S. trade deficit with Africa is almost $13 billion. The former has led to some discontent in Africa; the latter is unacceptable to Trump's trade hawks.

What about the foreign direct investment (FDI) flows? U.S. FDI into Africa peaked at more than $9 billion in 2009. At the same time, Chinese FDI into Africa soared from less than $0.1 billion to $5.5 billion annually. Following the global crisis, the Obama administration pledged greater investments in Africa. In reality, the era saw a dramatic fall of U.S. FDI into Africa, as it plunged to a negative of $2 billion in 2016. Concurrently, Chinese investment in Africa took a hit as well, decreasing to $2.5 billion in 2012. In 2017, U.S. investment rose to only $0.3 billion; while Chinese FDI exceeded $4.1 billion annually.

In the 2018 Forum on China Africa Cooperation (FOCAC), President Xi Jinping pledged $60 billion to the continent in loans, grants, and development financing. That's when the Trump administration developed its "new Africa strategy," which is constrained by trade protectionism and longer-standing U.S. geopolitical goals.