Africa’s Trade with China and US: Has COVID-19 Changed the Trends of Trade?

Adesola Ibironke

doi:10.52223/jei3022101

Abstract

Africa’s trade with China and the US is one of the international issues affecting development in the continent. This paper, therefore, examines the effects of COVID-19 on Africa’s trade with the two countries by investigating whether the pandemic has changed the trends of the trade. The article explores the responses of the individual trade of China and the US with Africa to their own shocks, without and with the pandemic, using the vector autoregressive (VAR) model and monthly data covering 1970m01 (January 1970) to 2020m07 (July 2020). The results show that China’s trade performs better while responding to a shock to America’s trade than America’s trade does while responding to a shock to China’s trade, without and with COVID-19. This finding suggests that China has a stronger trade footing in Africa and that COVID-19 had not changed the trends of Africa’s trade with China and America, even with the impact of the pandemic on China. China’s dominant trade status in Africa is probably due to the country’s large investment and aid in the continent. The key policy focus of Africa on trading with China and the US should therefore be how to achieve optimum trilateral trade thresholds in the face of potential trade-offs.

Highlights

International trade is a macroeconomic and internationalrelation issue that affects development in low-income countries, such as African countries
Trade promotes development in low-income countries in different ways, which include the following: (i) it increases economic growth which leads to a rise in per capita income; (ii) it creates jobs; (iii) it makes a variety of goods and services to be available for consumers to purchase from both domestic and foreign sources;(iv)it promotes the flow of new technologies from advanced countries; and (v) it leads to an increase in human capital via the training and education associated with international commercial relations
Three important conclusions have been derived from the findings of this paper regarding Chinese and American trade with Africa

Summary

Introduction

International trade is a macroeconomic and internationalrelation issue that affects development in low-income countries, such as African countries. Trade promotes development in low-income countries in different ways, which include the following: (i) it increases economic growth which leads to a rise in per capita income; (ii) it creates jobs; (iii) it makes a variety of goods and services to be available for consumers to purchase from both domestic and foreign sources;(iv)it promotes the flow of new technologies from advanced countries; and (v) it leads to an increase in human capital via the training and education associated with international commercial relations. The findings suggest the following: (i) African traders have more confidence to trade with China during a shock; (ii) China has a stronger trade footing in Africa than the US; and (iii) COVID-19 has not changed the trends of Chinese and American trade with Africa, in terms of the relative shares of the countries in Africa’s trade before the pandemic.

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