Regional Strategic Forecast 2024: Trade, Technology, and Tariffs - A New Era of Protectionism (My interpretation)

*This is my interpretation and recommendation after the EICN discussions and does not represent the views of the hosts and guest speakers at the event.

On November 21, 2024, the Economist Intelligence Corporate Network (EICN) convened at The Westcliff in Johannesburg to discuss the implications of a rapidly evolving global trade environment. The event, titled “Regional Strategic Forecast 2024 - Trade, Technology and Tariffs: A New World of Protectionism,” featured insightful commentary from Alex Holmes of The Economist and South African Deputy Minister of Finance Ashor Sarupen . This article synthesises key themes from the event, offering strategic insights for decision-makers navigating the turbulent waters of 2024 and beyond.

Key takeaways included:

• A rise in global tariffs, driven by protectionist policies, including anticipated moves by a Donald Trump administration in the US.
• The growing prominence of connector countries like Mexico and Vietnam in global trade, and their implications for emerging markets.
• Africa’s unique position to capitalise on its growth potential by focusing on strategic trade roles rather than attempting to replicate China's manufacturing dominance.
• A recalibration of monetary and fiscal policies in light of easing inflation and rising geopolitical risks.

The New Landscape of Protectionism

Tariffs on the Rise

The anticipated rise of Donald Trump as the 47th President of the United States has reignited trade protectionism, with expected average tariff hikes of:

• China: ~30%
• Rest of the World: 5-10%

While these figures are lower than Trump's campaign rhetoric (60% for China and 40% globally), they reflect a significant shift towards a more insular global trade policy. This strategy, coupled with China's overcapacity, is fuelling a global consensus for trade protectionism.

Implications for Supply Chains

Countries like Mexico are reaping the benefits of near-shoring and friend-shoring trends as companies seek to circumvent rising US tariffs. Mexico's northern regions, in particular, are experiencing a surge in foreign direct investment (FDI) and export activity, with firms like Temu and Shein using creative approaches such as packaging small parcels to avoid taxes.

China, meanwhile, is leveraging countries like Vietnam as intermediaries to access US markets. This strategy of utilising connector countries has lengthened global supply chains and increased competition for countries vying to attract FDI.

The Global Growth Story: Challenges and Opportunities

Emerging Markets Lead the Way

Despite a backdrop of rising debt burdens, climate change challenges, and technological disruptions, emerging markets, particularly in Africa, are poised to post the highest average growth rates in 2025. This growth is driven by:

• Demographic dividends, with Africa and India leading global population growth.
• A surge in infrastructure investment and resource-driven growth.
• Strategic positioning within global supply chains as connector hubs.

Inflation and Interest Rate Trends

After years of persistent inflation, the global economy is witnessing a downward trend. This easing inflation is expected to prompt central banks to cut interest rates in 2025, providing a much-needed stimulus for economic recovery. However, inflation is unlikely to return to near-zero levels, indicating a new normal for global monetary policy.

Sectoral Insights

Energy: Oil Price Surge

Oil prices are expected to rise significantly in 2025, driven by geopolitical tensions and supply constraints. This will have cascading effects on global transportation, manufacturing costs, and inflationary pressures, particularly in energy-dependent emerging markets.

Technology: The Rise of Techno-Nationalism

The global technology landscape is becoming increasingly fragmented as nations prioritise self-sufficiency.

• China leads in the legacy chip segment, solidifying its dominance in critical technologies.
• The US and EU continue to focus on fostering domestic semiconductor industries to reduce reliance on China.

For Africa, this represents an opportunity to position itself as a hub for light manufacturing and assembly of technology products, leveraging its proximity to European and Middle Eastern markets.

Africa’s Strategic Opportunity: Becoming a Connector Continent

Instead of aiming to replace China as the "manufacturer of the world," Africa can carve out a niche as a connector continent. By establishing warehouses, logistics hubs, and light manufacturing facilities, African nations can:

• Integrate into global supply chains as value-adding intermediaries.
• Attract increased FDI from multinationals seeking tariff-free trade routes.
• Leverage the African Continental Free Trade Area (AfCFTA) to consolidate regional trade advantages.

This approach aligns with trends seen in connector countries like Mexico and Vietnam, which have successfully attracted FDI and bolstered export activity through strategic trade positioning.

India’s Ascent: Lessons for Africa

India is set to experience exponential growth between 2024 and 2028, driven by:

• A burgeoning middle class and consumer market.
• Strategic government investments in infrastructure and technology.
• Integration into global value chains, particularly in services and technology.

For Africa, India’s success underscores the importance of aligning national policy with global economic trends. By focusing on education, infrastructure, and trade facilitation, African nations can emulate India's trajectory and unlock their growth potential.

Conclusion

The global economy in 2024 and beyond will be characterised by rising protectionism, shifting supply chains, and uneven growth across regions. For African leaders and businesses, this represents both a challenge and an opportunity. By adopting a connector country strategy and capitalising on its demographic and geographic advantages, Africa can position itself as a key player in the new era of global trade.

Recommendations for Business Leaders

1. Monitor Trade Policies: Stay updated on tariff changes and adjust supply chain strategies accordingly.
2. Invest in Connector Opportunities: Explore opportunities to establish logistics hubs and light manufacturing in Africa.
3. Leverage Regional Trade Agreements: Utilise frameworks like AfCFTA to maximise intra-African trade and reduce dependency on external markets.
4. Prepare for Inflationary Pressures: Develop strategies to mitigate rising energy costs and supply chain disruptions.
5. Adopt Technology Strategically: Focus on integrating legacy technologies while investing in workforce up-skilling for advanced manufacturing.

The message is clear: those who adapt to the new world of protectionism will emerge stronger and more competitive in the global market.