Trade deficit cannot be fixed with tariffs – Bawumia cautions global leaders
Dr Bawumia made these remarks at the 2025 International Democrat Union (IDU) Forum in Brussels during a panel discussion
Former Vice President of the Republic Dr Mahamudu Bawumia, has told global leaders that tariffs are not a solution to trade imbalances in the world’s trading space. Dr Bawumia insists that such measures are fundamentally flawed and historically counterproductive.
Dr Bawumia made these remarks at the 2025 International Democrat Union (IDU) Forum in Brussels during a panel discussion in response to the moderator’s question: “How is the weaponisation of trade affecting African economies, particularly Ghana? And what strategies are being considered to strengthen the economic resilience of the African continent?”
Economic analysis
Dr Bawumia provided a wide-ranging economic analysis in his answer, warning global leaders that current approaches fail to heed historical lessons and economic fundamentals. “One of the things policymakers have failed to do recently is to understand the lessons of history and economics. You cannot fix a trade deficit with tariffs. It just doesn’t work,” he stressed.
Using macroeconomic theory, Dr Bawumia explained that trade deficits arise when a country spends more than it saves, not from the trade structure itself.
“The deficit is a macroeconomic problem, not a trade policy issue,” he said. “When investment exceeds savings, a trade deficit becomes inevitable. Trying to correct that through tariffs is simply misplaced policy.”
He cited examples from history, including the U.S. Smoot-Hawley Tariff Act of the 1930s and the more recent U.S.-China trade tensions of 2018–2019, both of which resulted in significant setbacks for global trade.
“The U.S. has raised its average tariff rate from 2.4% to 10%—the largest increase since 1943. This will not be without consequence,” he warned.
Africa’s trade limitations
Although Africa’s trade exposure to the U.S. is relatively limited—with 6.5% of its exports and 4.4% of its imports involving the U.S., Dr Bawumia highlighted the specific vulnerability of countries like Lesotho, whose textile exports to the U.S. account for around 50% of total exports under the African Growth and Opportunity Act (AGOA). “AGOA is at risk of collapse under these new tariffs, and countries like Lesotho will be hit hard,” he noted.
Dr Bawumia called for a shift toward self-reliance and regional integration. “Africa must look inward, strengthen intra-African trade, which currently stands at just 17 to 20%, and reconfigure supply chains to reduce exposure to global shocks,” he emphasised.
On China’s expanding role in Africa, Dr Bawumia responded to another question about whether the continent would lean more heavily toward China amid rising global protectionism.
He explained that while China remains Africa’s largest trading partner and investor in Ghana, African nations are increasingly evaluating partnerships based on national interest rather than geopolitical allegiance.
“The rules-based global order has been disrupted. Old alliances are no longer stable, and uncertainty now defines international relations. African countries will diversify based on what works best for them, while pursuing value addition and economic independence,” Dr. Bawumia indicated.
Trust
Asked what would matter more in the next four years—tariffs or trust—Dr Bawumia responded: “For me, trust is going to be more important than tariffs.
Tariffs will not be sustainable, and we will soon all find out that it’s a rush to the lowest common denominator. I think that the evidence that we have over history shows that tariffs don’t work, but what we don’t have now is trust”.
He noted that mutual suspicion between major powers such as the U.S., China, Europe, and Russia has undermined the diplomatic environment for effective trade negotiations. “
Today, we live in an age of mutually assured suspicion. Without rebuilding trust, trade agreements will continue to be compromised by underlying security fears,” he said.
Dr Bawumia called on world leaders to reestablish trust and pursue economic strategies grounded in macroeconomic realities rather than reactive trade policies. “
Africa must look forward not to the East or West but toward building its own resilient, value-driven economies,” he added.
Reporting by Wilberforce Asare in Accra
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