How US-China trade wars are reshaping East Africa

The US-China trade war is back with a vengeance, and its ripple effects are making their way to East Africa. The world’s two largest economies are locked in an escalating tariff battle, with Washington imposing fresh levies on Chinese imports and Beijing retaliating in kind.

But how does this battle between giants reshape the global economy?

More critically, will East Africa emerge as an unlikely beneficiary of shifting trade flows, or will it become collateral damage in a high-stakes power struggle? The region, deeply linked to Chinese infrastructure financing and US economic partnerships must brace itself for both threats and opportunities.

The global economic order is shifting at an unprecedented pace. Protectionism is no longer an exception but a growing norm, with multilateral trade agreements giving way to nationalist policies. The US, historically a proponent of free trade, is reinforcing economic barriers, compelling trading partners to rethink their strategies.

For East Africa, this means navigating an increasingly complex landscape where economic powerhouses are prioritising self-reliance over global trade cooperation.

Chinese exporters, facing constraints in the US, are searching for alternative markets, which could flood African economies. At the same time, American firms are reassessing foreign direct investment (FDI), leaving infrastructure and manufacturing projects hanging in the balance.

Yet, East Africa is not merely a passive observer in this unfolding trade battle. The region is positioning itself as a viable alternative for global manufacturers looking to restructure their supply chains. Ethiopia, for instance, has emerged as an attractive destination for solar cell production, with Japan’s TOYO Co. Ltd investing in a 2-gigawatt solar cell manufacturing facility in Hawassa to support US clean energy production.

Read: How Africa can seize opportunity presented by US, China trade war

This shift underscores how the US-China trade war is prompting realignments in global manufacturing, creating opportunities for East Africa. With the right policies, the region could emerge as an unexpected beneficiary, attracting investment from firms seeking to diversify away from China and other heavily tariffed regions.

However, challenges remain substantial. Inflation is a primary concern. With China redirecting its exports, East African markets could initially experience a wave of cheaper imports. But the reprieve may be short-lived. As Chinese manufacturers adjust to new economic realities, rising production costs are likely to be passed on to consumers.

For a region where Chinese-made goods—from electronics to agricultural machinery—dominate local markets, this could mean a significant squeeze on household budgets and industrial operations. Rising global shipping costs, another consequence of disrupted trade flows, will only exacerbate the problem.

Foreign direct investment is another critical factor. Chinese-backed infrastructure projects, which have been instrumental in East Africa’s development trajectory, are already slowing down with Beijing’s commitments to Kenya falling by more than a third over the past three years (Kenya National Bureau of Statistics [KNBS]).

This decline reflects a broader global trend, as foreign direct investment in developing economies fell by two percent in 2024, marking a second consecutive year of decline driven by weak project financing and investor uncertainty (United Nations Conference on Trade and Development [UNCTAD]).

Meanwhile, the US is expanding its economic footprint in Africa, with the US International Development Finance Corporation (DFC) committing $5 billion to African infrastructure and energy.

But will these initiatives be enough to compensate for the slowing flow of Chinese capital? And more importantly, can East African economies adjust quickly enough to maintain their development momentum? As global trade tensions deepen, East African economies are finding themselves increasingly exposed to the fallout of shifting economic policies beyond their control.

While the US-China conflict continues to shape regional trade dynamics, another economic storm is brewing closer to home.

Kenya, in particular, is grappling with a fresh trade setback as Sudan enforces a ban on its exports, including tea, edible oils, and processed foods.

The ban also comes in the wake of Kenya hosting meetings involving the Rapid Support Forces (RSF), a paramilitary group embroiled in Sudan’s internal conflict, exacerbating diplomatic tensions between the two nations. The question remains—will this push both countries toward dialogue, or deepen the divide?

Read: Kenya should diversify trade ties amid unpredictable global shifts

Complacency is not an option. East African governments must act decisively to shield their economies from the worst effects of global trade turbulence. First, deepening regional integration through the African Continental Free Trade Area (AfCFTA) is essential.

Strengthening intra-African trade could reduce reliance on any single external partner, offering a buffer against external shocks.

Second, investing in domestic manufacturing through targeted incentives and tax reliefs could lessen dependence on Chinese imports and create jobs. Third, diversifying trade partnerships—beyond China and the US to include Europe, India, and Southeast Asia—could mitigate exposure to geopolitical tensions.

Notably, the Kenya-European Union Economic Partnership Agreement (EPA) presents a promising opportunity.

The agreement provides duty-free and quota-free access for Kenyan exports to the EU market, while also encouraging European investments in value-added industries within East Africa.

Initially, other East African Community (EAC) member states hesitated to sign the agreement, citing concerns over potential impacts on their domestic industries and the lack of sufficient regional consultations.

However, as global trade disruptions mount, the need for greater access to European markets and foreign direct investment has become evident.

By tapping into this trade framework, East African economies can diversify export destinations, attract strategic investments, and build long-term resilience against external shocks.

The US-China trade war is no longer a distant geopolitical event but actively shaping East Africa’s economic trajectory.

Whether the region emerges stronger or suffers the brunt of global economic realignment will depend on how effectively it adapts to these shifting sands. One thing is certain: the trade war is far from over, and East Africa must navigate its course with precision, strategy, and foresight.

The writer is a researcher, Mashariki Research and Policy Centre