The unilateral decision by US President Donald Trump to impose a 25 percent tariff on imports from China, Canada and Mexico will cause a major volcanic and retaliatory trade war that is likely to cause disruptions globally.
The US, like Canada, China and Mexico, are members of the World Trade Organisation (WTO) and signatories to the multilateral agreement.
By imposing a unilateral tariff of 25 percent, USA has violated the multilateral agreement, prompting retaliatory measures like the ones taken by Canada already.
It is likely that other members will do so against the USA exports to their respective countries. This could lead to trade wars and negate the previous benefits derived from the multilateral trading system.
Now, the purpose trade is to raise standard of living among the trading countries. Trade also ensures that factors of production are utilised to the maximum while considering the benefits of comparative advantages and gravity theories of cross-border trade.
In computation of the gross domestic product (GDP) of countries, trade is a major component since countries earn foreign exchange and improve the balance of trade and payments betterment trading nations.
For Kenya, the trade with the rest of the world makes the country get more by exports of tea, horticulture, coffee, apparel and exports of services. This assists in creation of employment, increase in comes, reduce poverty and improve livelihood of citizens.
Kenya is a member of the WTO and other multilateral agencies. The country has relations with East African Community (EAC), Common Market for Eastern and Southern Africa (Comesa), African Growth and Opportunity Act (Agoa), China, Japan, India and other countries.
This move by the US has not considered other factors that influence trade apart from tariff. These are other trade measures which are non- tariff related, and other member states can use them against the USA.
These measures include technical barrier to trade, sanitary and phytosanitary measures, rules of origin, subsidy and related countervailing measures.
In today's world, trade is more in services and intellectual property, including technology.
In the technological landscape there is the modern marketing which has brought to the fore the uses of Internet of Things (IOT), artificial intelligence (AI), Machine Learning, 3D printing, drones, holographic projections, 5G, Augmented Reality, Virtual Reality, smart speakers, mobile phones, play stores and others.
Add these to the effects of social media and you see why this trade measure by Trump might end up being a disaster both to the US and other trading partners.
For Kenya, it is time to be alert and have strategic trade policy plans on how to handle the changes and possible erratic pronouncements from the USA.
Take note that even the Agoa, which enables Kenya to export apparel to the USA could be at risk.
Trade policies need to put on high alert trade related risks and measures to handle such contingencies.
The writer is a multilateral trade expert and author of ‘Luo Clans and Legends’. Email: [email protected] or [email protected] Tel: 0721 735489 or 0733 735489