US tariffs blow a death knell for Agoa?
Publish date: 07 April 2025
Issue Number: 1120
Diary: IBA Legalbrief Africa
Category: Trade
African nations, hit hard by US President Donald Trump's economic tariffs, have chosen to respond cautiously in the hope that they can can get him to back down, despite every indication that the 25-year-old African Growth and Opportunity Act (Agoa), which guaranteed duty-free access to American consumers for certain goods from the continent, is virtually dead, notes Legalbrief. As noted in a BBC News report, Agoa was considered the cornerstone of US-Africa economic relations. The aim was to help industrialise the continent, create employment and lift dozens of countries out of poverty, as its intent was based on a philosophy of replacing aid with trade. The Act's overall impact is debateable but it has been credited with creating hundreds of thousands of jobs, particularly in the textiles sector. Though Trump did not mention it by name during his tariff announcement, Agoa's status is now uncertain. Like so much that has come out of the White House in the whirlwind first few weeks of Trump's Presidency, Wednesday's announcement has sown confusion – especially, in this case, in Africa. On the one hand there is Agoa, with its tariff-free arrangement, and on the other there is Trump outlining tariffs ranging from 10% (including Kenya, Ethiopia and Ghana) to 31% (South Africa) and 50% (Lesotho). Which takes precedence? South Africa, which exports metals and cars to the US, believes this spells the end of Agoa. ‘The reciprocal tariffs effectively nullify the preferences that sub-Saharan Africa countries enjoy under Agoa,’ South Africa's Foreign and Trade Ministers said in a joint statement on Friday.
Kenya's Principal Secretary for Foreign Affairs Korir Sing'oei had a different take. ‘It is our considered view that until the law lapses end of September 2025 or unless repealed earlier by Congress, the new tariffs imposed by President Trump will, in any event, still not be immediately applicable,’ he said. Kenya, which exports clothes to the US, has tried to put a brave face on the issue, saying that as it was not hit as hard as other textile exporters, such as Vietnam and Sri Lanka, it would still have a competitive advantage. Whatever happens to Agoa in the immediate term, it seems that Trump's sweeping tariffs have scuppered hopes of the legislation being renewed. The Clinton-era law, which in the current climate is beginning to feel like a relic of a bygone time, was up for renewal later this year. Since 2000, certain African countries had duty-free access to the US market for a raft of goods including clothing and textiles, cocoa products and wine, as well as crude oil, notes BBC News. The access was tied to a number of conditions including free market policies, labour and human rights and political pluralism. Thirty-two countries from sub-Saharan Africa were eligible as of last year. In 2023, two-way trade under Agoa totalled $47.5bn, with the US exporting $18.2bn worth of goods and imports amounting to $29.3bn. By virtue of being among the continent's largest economies, South Africa and Nigeria have dominated trade under the Act, but Lesotho has taken full advantage and has become a significant exporters of garments to the US, supplying brands such as Walmart, GAP and Old Navy. Lesotho clothes manufacturer Teboho Kobeli said the US tariff on imports from his country was a big blow. A future without Agoa – for Lesotho and others – presents big challenges. If nothing changes, ‘a tariff of 50% sounds like a death knell to the Agoa manufacturing in Lesotho’, said Mukhisa Kituyi, a former secretary-general of the UN Conference on Trade and Development and a former Kenyan Trade Minister.
In 2018, the World Bank modelled a scenario where Lesotho experienced the sudden loss of Agoa privileges and found that the impact would ‘reach 1% of GDP’ within two years. The report concluded that impact on welfare would be ‘dramatic’. But, as witnessed with the aid cuts, arguing about the human impact or fairness will not fly in the current set-up, in the face of ‘disruptive populism and post-fact, post-truth society, Kituyi argues. He thinks countries, like Kenya, that have the new tariffs set at 10% could still try to hold ground in the US market, with the exporters and their American importers negotiating how to absorb the new taxes without raising prices for the consumer too much. As Kituyi was involved in trade negotiations, including Agoa, he has seen first-hand the effort that goes into ‘fine-tuning these processes’ to create a ‘shared benefit from stable, predictable rules-based trading’. But now, he reckons, such agreements are ‘hostage to the wishes of the dominant political group in America’.
Michelle Gavin, a senior fellow for Africa policy studies at the Washington-based Council for Foreign Relations, said the way the new tariffs have been calculated ‘makes no sense at all’ to economists. It's difficult to sort of see ‘any kind of clear strategy or intention’, from the Trump administration so far, she said. But the decisions would only exacerbate the loss of American influence in Africa, she warned, according to BBC News. China, already the continent's biggest trading partner, could take further advantage. Coming shortly after the Trump administration severely pared back the US Agency for International Development, leading to the cancellation of both humanitarian and life-saving health assistance, the analyst said America appeared to be ‘destroying its own instruments of influence with abandon now’.
Among the unpleasant surprises contained in the tariff regime announced by Trump was the disproportionate impact on the poorest countries, including 32 low-income countries in Africa who have had duty free access to US markets since 2000 under Agoa, reports the Centre for Global Development. Agoa provides sub-Saharan African countries with duty free access for nearly 7 000 products. Many are low-income countries facing unsustainable debt levels: Ghana, Zambia and Malawi are in default, and six more – Guinea Bissau, Sierra Leone, Kenya, Chad, the DRC and Mozambique – are at risk of debt distress. Agoa is set to expire in September 2025, and there were already doubts about its reauthorisation prospects, but allowing Agoa to lapse would have been a much better outcome than this new tariff regime. According to the latest report from the office of the US Trade Representative (USTR), US imports under Agoa totalled $9.7bn in 2023 (2024 data are not yet available). Top imports were crude oil ($4.2bn), apparel ($1.1bn) and agriculture (over $900m). The top exporters to the US were South Africa ($14.0bn), Nigeria ($5.7bn), Ghana ($1.7 bn), Angola ($1.2bn), and Côte d’Ivoire ($948bn).
The programme has been uneven: US imports from Agoa countries peaked in 2008 at $86bn, but for the past five years they have averaged $26bn. A key factor is the volatility of oil prices, which make up the bulk of the imports, and hit a record $147.50 per barrel in 2008. This correlation between oil prices and trade volumes has diminished in recent years as the composition of Agoa country exports has shifted, according to the Centre for Global Development. A 2024 assessment of Agoa by Brookings found that non-crude oil exports to the US increased by 241% between 2001-2022, while oil exports fell by 50%. Literally overnight, the US has imposed steep tariffs on these countries. (Fortunately, the US is a relatively small export market for most Agoa countries. Nineteen Agoa countries have a share of total exports to the US below 4%, with Togo right on the line. In addition, energy is exempt from the new tariffs, so major oil, gas, and petroleum exporters will not be much affected. This includes Angola, Chad, the DRC, Ghana and Nigeria. But for a few, the impact could be severe, especially those who rely on the US as an export market for apparel.
Lesotho scrambled to put together a delegation on Friday to head to Washington to engage with the US on tariffs that risk wiping out nearly half of its exports, its Trade Minister said, in what could be a death blow to its economy, reports News24. The 50% reciprocal trade tariff on the tiny southern African mountain kingdom was the highest levy on Trump's list of target economies. ‘The latest policy direction undertaken by the United States is shocking ... as (it) ... has been a very important market for Lesotho,’ Trade Minister Mokhethi Shelile told Parliament on Friday, adding that the 45% of exports went to the US. He said that officials had already engaged the US embassy ‘to clarify how, and why Lesotho was included in the list of ... such high reciprocal tariffs.’ Lesotho's exports to the United States, mostly textiles for popular brands such as Levis, added up to $237m in 2024 and account for more than a tenth of its GDP. ‘Lesotho is also assembling a high-level delegation to the United States to try to maintain the current market dispensation,’ Shelile said. In the medium term, he said, the kingdom would ‘increase efforts to export to alternative markets such as the European Union and the Africa free continental trade area’. Lesotho has a population of 2m people and is one of the world's poorest countries, with GDP per capita of $916 in 2023, according to World Bank figures.
The South African Government said it would not impose reciprocal tariffs yet, warning that responding without understanding how the US set the rate and without first talking to the US could be counterproductive, reports the Daily Maverick. Trade & Industry Minister Parks Tau and International Relations Minister Ronald Lamola made the remarks on Friday. While trade experts have already warned that the tariff increase will affect ordinary South Africans, causing an increase in export prices, inflation, jobs, and interest rates, the government says the right thing to do is to engage the US administration. ‘I think it’s a risky thing to do, to simply decide that we’re now going to impose reciprocal tariffs. I think it would be ill considered to simply just make a decision to impose reciprocal tariffs. Our mandate is to engage, to find solutions and to resolve problems,’ Tau said. The tariff has effectively negated South Africa’s lucrative duty-free exports into the US under Agoa. SA is, in any case, likely to be booted out of the Agoa programme soon because of the Trump administration’s hostility to many of its domestic and foreign policies. Despite the urgency of the situation, both Tau and Lamola would not provide a definitive timeline for when President Cyril Ramaphosa would send a delegation to the US. Relations between the two countries have been strained over issues including the Expropriation Act and South Africa’s legal actions against Israel, to name a couple. Last month, South Africa’s ambassador to the US, Ebrahim Rasool, was expelled. US Secretary of State Marco Rubio described Rasool as a ‘race-baiting politician’ with hostile views toward both America and Trump.
Meanwhile, Zimbabwe's President Emmerson Mnangagwa has announced he will suspend tariffs on goods imported from the US in an attempt to build a ‘positive relationship’ Trump's administration, reports BBC News. The move comes days after Trump imposed 18% tariffs on Zimbabwean exports to the US. ‘This measure is intended to facilitate the expansion of American imports within the Zimbabwean market, while simultaneously promoting the growth of Zimbabwean exports destined for the United States,’ Mnangagwa said on X. Zimbabwe has had strained diplomatic relations with the US since it adopted a controversial land policy about 25 years ago, and because of its poor human rights record. Trade between the two countries amounted to only $111.6m in 2024, US Government data shows. The US exported goods worth $43.8m to Zimbabwe in 2024, up 10.6% from the previous year, while imports were down 41% to $67.8m. Zimbabwean political analyst Tendai Mbanje told AFP news agency that the decision would not result in substantial economic benefits for Zimbabwe and would would only benefit the US. Prominent Zimbabwean journalist and government critic Hopewell Chin'ono said the President appeared to be trying to 'appease’ the Trump administration. Mnangawa possibly hopes that the administration would lift sanctions imposed on him, but it was a ‘long shot’, he added on X. While in Tanzania economists and policy experts are urging the government to adopt strategies that will shield the country from potential economic losses, reports The Citizen Tanzania.
