China has decided to cut its tariffs on goods from 9 African countries by 98 per cent. The reduction in import tax came into force on 1 September and includes primary commodities from the Central African Republic (CAR), Chad, Djibouti, Eritrea, Guinea, Mozambique, Rwanda, Sudan, and Togo. The Chinese government wants to increase its current level of imports from these countries from $160 billion to over $300 billion by 2035.

This applies to mined commodities such as rare earth metals, cobalt, coal and natural gas. The reduction in tariffs also includes the agricultural goods China imports from Africa such as avocados, chillies and sesame seeds.

A key driving force for this move by the Chinese is to create secure long-term trade arrangements with suppliers of agriculture and minerals which are a key part of China’s long-term growth strategy in manufacturing. For example, with a high level of global competition for rare earth metals, China needs to develop a reliable supply chain from Africa.

By encouraging free trade with African countries China is also able to develop its export markets for its own industries. Chinese exported goods to Africa that range from automobile parts to cosmetics and computer hardware sell well because of their quality and price competitiveness.

Another important reason for the reduction in Chinese tariffs on African commodities is China’s desire to spread its political and economic influence on the African continent through soft power.  This is a similar motivating factor to investment by Chinese development banks in African infrastructure on projects over the last 10 years which improved the continent’s roads, rail and information technology.

So who are the winners and losers of the announcement by President Xi’s government to reduce tariffs on African Commodities by 98%? The price of imported goods in China such as avocados and chillies is likely to fall which will benefit Chinese consumers. Similarly, Chinese businesses that use, for example, cobalt and natural gas in their production processes are going to see their costs fall. The businesses that export goods from the nine African countries affected by the tariff reduction are likely to see their revenues.

There will, however, be losers, particularly amongst Chinese commodity producers who will now face increased competition from African imports. In the longer term, there is also a risk from African producers who become over-reliant on exports to China.  

Some possible questions to discuss with a class

1. Why do countries like China put tariffs on imported goods?

2. Discuss the reasons why China has reduced its tariffs on imported goods from Africa.

3. Who do you think benefits most from China's reduction in tariffs on imported goods from Africa?