Africa is being hit by one disaster after another. Still reeling from United States Agency for International Development funding cuts, it has had to digest US President Donald Trump’s seemingly random and illogical massive trade tariffs.
These may have effectively killed the African Growth and Opportunity Act (AGOA), which gave non-reciprocal, duty-free access to the lucrative US market for most exports from 32 eligible sub-Saharan countries.
|
|
The 25-year-old programme would probably have been terminated anyway when it came up for renewal in September. But the huge tariffs, which were to kick in on 9 April, would override AGOA benefits, US officials told ISS Today – effectively making AGOA null and void.
Then, late on Wednesday after the markets crashed because of Mr Trump’s ‘tariff tantrum’, he temporarily suspended tariff hikes for 90 days, except for a 10 per cent baseline tariff and those on China, which were increased to 145 per cent.
|
|
|
|---|
Few African countries have fully used AGOA benefits, but it has been useful for the likes of South Africa, Lesotho, Madagascar and Eswatini. One of the anomalies of Mr Trump’s tariffs was that countries benefitting most from AGOA were hardest hit because their exports under AGOA helped them achieve trade surpluses with the US. So they were hit with high ‘reciprocal’ tariffs, supposedly to balance trade.
The most extreme example of this was tiny Lesotho, slapped with the highest tariffs globally of 50 per cent, followed by Madagascar (47 per cent), Mauritius (40 per cent) and South Africa (31 per cent).
Lesotho exported $237.3 million of goods to the US in 2024 – mainly textiles under AGOA and diamonds. It imported only $2.8 million worth of goods from the US, largely because Lesotho imports almost all its requirements from neighbouring South Africa.
But that created a relatively large trade deficit, so Lesotho was slapped with a 50 per cent tariff. Lesotho imposes zero or very little tariffs on US imports. The tariff could cost 12,000 jobs, Lesotho Trade Minister Mokhethi Shelile said, and close 11 factories.
Similarly, Madagascar exported $733.2 million in goods to the US in 2024, much of it in textiles under AGOA, and imported only $53.4 million in goods, creating a large trade deficit. So Madagascar was smacked with a 47 per cent tariff, which would probably also wipe out its textile industry, at a cost of 60,000 jobs.
South Africa was also likely to be hit hard, with about $3.567 billion of mainly automobile and agricultural annual exports under AGOA (as of 2023) likely to be wiped out. That would knock around 0.3 percentage points off gross domestic product that grew by only 0.6 per cent last year.
The perverse logic of the tariffs meant that some countries, like Kenya, escaped with the minimum tariff of 10 per cent.
How to react is probably an easier decision for African countries than for some others, like China and the European Union, which retaliated with large tariffs on US imports. African countries have neither the economic strength nor the scale of US imports to fight back, so their route is negotiation.
Kenya sent a delegation to Washington on 1 April and South Africa was preparing to send one too, but was first assessing the ramifications. Others were trying to get appointments to plead for revocation or reduction of tariffs. Some are looking for alternative markets for their exports and making plans to buy more US goods to help balance trade.
Shelile said Lesotho was talking to US wheat producers about buying their product and was considering giving US companies a stake in the country’s proposed construction of more power generators.
Madagascar’s foreign affairs ministry said it was already talking to US authorities.
Zimbabwean President Emmerson Mnangagwa – despite being under US sanctions for human rights violations – piously announced that he was suspending tariffs on US goods “to facilitate the expansion of American imports within the Zimbabwean market, while simultaneously promoting the growth of Zimbabwean exports destined for the [US].”
Mr Trump had slapped an 18 per cent tariff on Zimbabwe, which had only $111.6m worth of trade with the US in 2024, with the US exporting $43.8m worth of tractors and other goods in 2024 while importing $67.8m worth of ferroalloys, tobacco and sugar.
Some African countries could adjust their trade policies after the US accused them of “unfair trade practices.” Nigeria’s longstanding import ban on 25 product categories, Kenya’s 50 per cent tariff and what the US Trade Representative called “burdensome regulatory requirements” on US corn imports were cited. South Africa’s 30 per cent tariff was partly attributed to unfairly high tariffs on imports of US poultry and pork.
There are some signs of a coordinated response from Africa. Shelile confirmed, even after Mr Trump’s reversal, that the Southern African Customs Union’s trade ministers would meet early next week to try to navigate a path ‘out of this quagmire.’ Madagascar’s government has begun consulting other African countries to coordinate a common position.
The full implications of Mr Trump’s tariff tantrum remain murky, especially after his Wednesday flip-flop. Did he withdraw them ‘provisionally’ only to save face, or will they come roaring back in three months? And what does this all mean for AGOA?
Like most analysts, Manchester Trade President Stephen Lande believes, “AGOA is dead for the long term. The question is, however, whether we can have it extended either by administrative decree or by Congress for a short period to allow a more transactional approach to be introduced.
“It would not be good to have a void created with AGOA ending and no policy to take its place. The only winner will be China. Maybe an alternative policy could be agreed on in the 90-day reprieve period.”
However, Eckart Naumann, a Trade Law Centre Associate, believes that even if the ‘reciprocal’ tariffs return, some AGOA beneficiaries could still enjoy a relative advantage over other countries since all countries will face the extra tariffs.
READ ALSO: SPECIAL REPORT: Europe’s anti-deforestation regulation threatens Nigeria’s cocoa export
But if the high tariffs imposed on clothing producers like Lesotho, Madagascar and Mauritius are re-imposed, they will be at a major disadvantage to a country like Kenya, which got the 10 per cent baseline tariff.
Mr Naumann notes that the US exempted some products from tariffs, mainly minerals and energy, and some of these were important for South Africa, ‘so the AGOA advantage continues there.’
Nevertheless, he believes “the political environment for an AGOA renewal is very poor right now, though this may change once the dust settles.” He suggests that African states forge stronger trade alliances with reliable partners within a rules-based trading system.
With the reprieve, African countries have time to coordinate a response for a possible reinstatement of tariffs after 90 days. They should also accelerate implementation of the African Continental Free Trade Area agreement, which offers alternatives to the US market.
Peter Fabricius, Consultant, Institute for Security Studies (ISS) Pretoria
(This article was first published by ISS Today, a Premium Times syndication partner. We have their permission to republish).
Discover more from Premium Times Nigeria
Subscribe to get the latest posts sent to your email.
