On April 2, President Donald Trump announced tariffs on virtually every trading partner of the United States in what he called “Liberation Day.” He said the day would “forever be remembered as the day American industry was reborn.” As part of Trump’s tariff plans, every American trading partner had a baseline 10% tariff imposed on their exports to the United States. Many countries also were hit with further tariffs beyond the 10% baseline. One of the hardest hit regions by the recently announced tariffs was sub-Saharan Africa. Countries in the region include Lesotho which was hit with a 50% tariff, Madagascar with a 47% tariff, Mauritius with a 40% tariff, Botswana with a 37% tariff, and South Africa with a 30% tariff.
On April 9, Trump announced that he was pausing most additional tariffs after the 10% baseline tariff for three months. However, if the tariffs are to go into effect, they will likely devastate the economies of numerous developing economies in sub-Saharan Africa. The impact will be even more amplified as African countries are still working to recover from the dismantling of USAID, which provided significant foreign aid to many African countries, by the Trump Administration. The tariffs on African countries will not only damage economies in Africa, but also raise prices of goods for American consumers.
Many economists agree that the formula used by the Trump administration to determine tariffs on American trading partners is faulty and misguided, which led to unnecessarily high tariffs on many countries. First, the tariffs were determined based on the U.S. trade deficit in goods, as opposed to actual tariffs imposed by American trading partners on the U.S. This move punishes smaller African countries such as Lesotho and Madagascar, which import less American goods than they export to the U.S.. Another issue is the U.S. trade deficit measure only considers manufactured goods, not services, which the U.S .exports more than it imports. If the trade deficit measure was calculated including services exported by the United States, it would decrease for nearly every country in the world the U.S. trades with. Additionally, in calculating the trade deficits, the Trump administration primarily relied on the retail prices of goods, as opposed to import prices as many economists have suggested. If this correction was applied to the formula, Lesotho should have had a tariff rate of 13.2% imposed instead of the 50% tariff rate that was actually announced.
Trump’s tariffs on countries in Africa also signal the likely end of the African Growth and Opportunity Act (AGOA). AGOA was first implemented in 2000 and provides countries in sub-Saharan Africa duty-free access to American markets for thousands of products. AGOA was passed under President Bill Clinton and has been the centerpiece of American trade policy in sub-Saharan Africa for the past 25 years. Thirty five African countries are eligible for duty-free access under AGOA for goods such as motor vehicle parts, textiles, and agricultural products and AGOA has been credited for industrialization and job creation in these countries.
Support for AGOA in the United States has historically been bipartisan and renewed twice under Republican President George W. Bush and Democratic President Barack Obama. Many American politicians see the AGOA as a way to improve U.S. influence in the continent and to limit China’s influence in Africa. But, AGOA is set to expire this year in September. Although the Biden administration supported its renewal, it was unable to enact policies to renew AGOA. In light of Trump’s announced tariffs on many sub-Saharan African countries, the renewal of the AGOA seems highly unlikely, signaling the end of the act after 25 years. The end of AGOA is also coming at a time when China’s influence in the continent is growing and more African countries are entering into trade relations with China. Almost every country in sub-Saharan Africa is part of the Belt and Road Initiative and has taken on significant amounts of Chinese debt. If the United States ends AGOA and goes forth with its tariff plan, it will likely push more African countries to develop even stronger economic ties to China, which poses a threat to American trade.
An example of an African country whose economy will likely collapse if Trump’s tariffs are to take effect is Lesotho. The 50% tariff imposed on Lesotho is the highest rate out of all the countries in Africa. Trump has described Lesotho as a country “nobody has ever heard of.” The textile industry in Lesotho, which produces for brands like Levi’s jeans, is the country’s largest private employer and employs about 40,000 workers. Textiles also make up 90% of Lesotho’s exports and 45% of the country’s exports go to the U.S. The country’s exports to the United States are valued at close to $300 million and make up 10% of Lesotho’s GDP. The AGOA is also credited with supporting the growth of the textile industry in Lesotho and Lesotho is the fourth largest beneficiary of AGOA. The end of AGOA severely threatens Lesotho’s textile industry, the foundation of the country’s economy.
The unemployment rate in Lesotho was at 25% in 2023 and a significant portion of the population lives below the poverty line or lack access to basic education, health care, and clean water. Also, one in four adults in Lesotho have been infected by HIV, which is one of the highest HIV infection rates in the world. The tariffs on Lesotho will likely affect the country’s ability to respond to and will exacerbate the unemployment, poverty, and health crises facing the country. Because of the significant impact Trump’s tariffs will have on Lesotho’s textile industry, many economists predict that the tariffs will collapse the country’s entire economy. The tariffs will most likely lead to the closure of textile factories and a significant loss of jobs, worsening the country’s high unemployment. This will affect other industries in the country that rely on textile workers spending their money, such as retailers and property owners. If the textile industry collapses, Lesotho’s entire economy will likely collapse with it.
The negative effects of Trump’s tariffs will also impact American consumers since they will pay an additional price on unique African goods and crops from countries hit with tariffs. For example, Madagascar is one of the largest exporters of vanilla and American consumers buy more than a thousand tons of it annually. If Trump’s tariffs take effect, American consumers will likely see the price of vanilla rise drastically and may be forced to lessen their consumption of vanilla or use cheaper alternatives. Similarly, Botswana, one of the largest diamond exporters in the world, relies on trade with the U.S.for the sale of diamonds. American consumers will now pay higher prices on diamonds as well. Ivory Coast, which was hit by a 21% tariff, is the world’s largest exporter of cocoa, so Americans will also see prices rise for this good as well. South Africa also exports billions of dollars worth of vehicle parts to the United States, which may raise prices for American consumers and car manufacturers.
The Trump administration’s approach to trade policy in sub-Saharan Africa is greatly misguided and risky. The administration should reverse its tariff plan for sub-Saharan Africa, or at the very least significantly lower the tariff rate. It should also renew the AGOA before its expiry later this year. The high tariffs and the end of AGOA will likely collapse growing economies in Africa and reverse two and a half decades of economic progress and development. The death of AGOA will mostly benefit China’s position in Africa and allow it to develop even closer trade relations with more African countries.
Image source: Wikimedia Commons
