Policymakers have failed to learn a lesson from history and economics – Bawumia

Former Vice President Dr. Mahamudu Bawumia has criticized global policymakers. He believes they ignore important lessons from history and economics. This is especially true regarding trade imbalances.

He spoke at the International Democracy Union (IDU) Forum in Brussels on May 17. He addressed the weaponization of trade and its effects on African economies, particularly Ghana.

Dr. Bawumia stated that policymakers fail to grasp historical and economic lessons. He emphasized that trade deficits are not just policy failures.

He pointed out that Africa contributes only 2.5% of global exports and 2.9% of imports. In contrast, Asia accounts for 43% of global exports and 38% of imports. Europe contributes 38% of exports and 51% of imports, while the U.S. provides 8% of exports and 14% of imports.

These imbalances are significant but cannot be resolved with tariffs, he explained. Trade deficits arise from a mismatch between national savings and investment.

“A country that spends more than it saves will run a trade deficit,” he said. This issue is macroeconomic, not merely about trade policy.

Dr. Bawumia referenced the Smoot-Hawley Tariff Act from the 1930s as an example. This act imposed high tariffs and contributed to the Great Depression.

He also mentioned the U.S.–China trade war from 2018 to 2019, which disrupted global trade flows. Recently, U.S. tariff rates have increased significantly, rising from 2.4% to 10%.

While Africa is less affected overall, some countries may face risks. For instance, Lesotho relies heavily on textile exports to the U.S., under AGOA.

“When 50% of your exports are at risk, the impact will be significant,” he warned.