Josef Kefas Sheehama
Namibia will be susceptible to this financial contagion in the short to medium term, but I disagree with the Monetary Policy Committee (MPC) of the Bank of Namibia’s assessment that tariffs will have little immediate effect on GDP.
It is critical to recognize that Namibia’s economy is comparatively small, and a reduction in revenue from international sources will negatively affect the country’s liquidity, given that Namibia does not possess sufficient domestic markets to yield adequate income to offset the impacts of earnings from export markets. The markets are projected to continue being highly volatile, undergoing considerable fluctuations as we near the 90-days, although they are expected to remain within the existing range until more certainty is established. Investors are diligently pursuing clarity regarding short-medium-term tariffs and are vigilant for any adverse economic signals. The real effects of tariffs on inflation and interest rates are shaped by multiple factors, such as our reliance on imports and exports, the robustness of our currency, and the policies implemented by the Bank of Namibia.
Typically, tariffs are recognized for driving up prices, which can trigger a ripple effect across the economy, possibly resulting in elevated borrowing costs for all. It is essential for President Trump to recognize that although he seeks to safeguard American interests, the immediate consequences of tariffs will lead to higher expenses for domestic companies that import products, consequently impacting their export capabilities. An indirect consequence of tariffs will result in higher costs for Americans when purchasing goods that are either subject to tariffs or domestic products that rely on tariffed materials. This situation may incite public protests, potentially leading to disorder and a consumer boycott.
The African Growth and Opportunity Act is set to significantly impact Namibia’s exports of uranium, marble, rough diamonds, fish, timber, meat, grapes, lamb, and blueberries. If this act were to be repealed, Namibia’s export markets would encounter substantial difficulties. Therefore, for individuals aiming to understand the economic environment, it is crucial to acknowledge how policies like tariffs, which may seem simple initially, can produce complex and sometimes unexpected consequences in our everyday lives. The focus extends beyond mere trade statistics and economic theories; it encompasses the prices we encounter in retail, the interest rates applicable to our loans, and the general well-being of our economy. Monitoring these interrelations enables us to be better informed and to make more prudent choices regarding our financial affairs.
Furthermore, it is crucial to recognize that the uncertainty surrounding tariffs and their potential effects on both inflation and economic growth have resulted in increased rate volatility. It is prudent to gather additional information not only regarding trade policy developments but also concerning other areas such as fiscal and regulatory policies. Given Namibia’s small economic size, there is a greater concern for exchange rate stability, which may delay interest rate reductions. Consequently, elevated tariffs can contribute to inflation by raising the costs of imported goods. This rise in import prices can subsequently lead to higher prices for domestically produced goods, as producers transfer the burden of tariffs onto consumers. Inflation may arise from increased demand for goods and services, potentially triggered by government fiscal stimulus aimed at mitigating the economic downturn resulting from tariffs. Consequently, if elevated tariffs cause a notable increase in goods inflation, the Bank of Namibia may consider raising interest rates to combat this inflation.
However, increasing interest rates could hinder economic growth, complicating the ability of businesses to expand and generate employment opportunities. Therefore, the Bank of Namibia faces a complex challenge in balancing the need to control inflation with the necessity of maintaining a strong and growing economy. If tariffs not only fuel inflation but also impede economic growth, the Bank of Namibia will face a particularly complex decision.
Furthermore, the Bank of Namibia and other policymakers must remain vigilant in developing a stress test to assess the potential impact of tariffs on prices. This stress test should also consider the implications of rising inflation while the Bank of Namibia strives to reduce it, which may necessitate an increase in the repo rate. It is essential for the Bank of Namibia to devise a strategy that aligns macroprudential measures to mitigate shocks and safeguard financial stability in Namibia. It is crucial for the Bank of Namibia to prepare for the worst-case scenario within 90 days, rather than waiting for that period to elapse. We must have contingency plans in place, especially considering that South Africa is also affected by U.S. tariffs and our currency is pegged to theirs. The tariff regime under Trump poses significant risks to both international and local economies. The elevated costs associated with new tariffs jeopardize investments, jobs, and supply chains, potentially leading to increased inflation and an imminent recession if the U.S. persists in its trade war. In this context, I disagree with the Bank of Namibia’s assertion that the impact will be minimal; it is vital to view this situation as a warning.
Trump’s one-sided policies and confrontational tactics might produce certain short-term gains within 90 days; however, it is premature to forecast outcomes. Furthermore, some nations may dismiss concessions that do not serve their interests, and tariffs could lead to lasting effects, such as estranging important allies and hastening the disintegration of global trade systems. Consequently, the upcoming two months will reveal whether Trump’s approach is a strategic deception or a sincere shift towards economic isolationism
Therefore, the anticipated economic repercussions are expected to align with this trend, resulting in heightened inflation and a deceleration in growth. However, the magnitude and longevity of these impacts continue to be uncertain.
