The New US Tariff Regime Is Another Blow for Africa

The tariff regime announced yesterday by President Trump sent shockwaves through the global financial system. It will up-end countless longstanding commercial relationships, profoundly distort markets and significantly slow growth. Among the unpleasant surprises 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 the African Growth and Opportunity Act (AGOA).

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 reauthorization 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 totaled $9.7 billion in 2023. (2024 data are not yet available.) Top imports were crude oil ($4.2 billion), apparel ($1.1 billion) and agriculture (over $900 million). The top exporters to the United States were South Africa ($14.0 billion), Nigeria ($5.7 billion), Ghana ($1.7 billion), Angola ($1.2 billion), and Côte d’Ivoire ($948 million).

The program has been uneven: US imports from AGOA countries peaked in 2008 at $86 billion, but for the last five years they have averaged $26 billion. 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. A 2024 assessment of AGOA by Brookings found that non-crude oil exports to the US increased by 241 percent between 2001–2022, while oil exports fell by 50 percent.

Literally overnight, the US has imposed steep tariffs on these countries, ranging from 10 percent to a whopping 60 percent (for Lesotho). (See Table 1.) 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 four percent, 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. The table below lists each AGOA country, its new tariff regime, key exports, and the relative importance of the US market.

Here’s another way to look at it:

*Although the US is major export market for Chad, the bulk of its exports are in energy and should be exempt from the new tariffs.

The countries most vulnerable to the new tariff regime are Lesotho, Mauritius and Madagascar. All three are small, low-income countries that export apparel. The shock to the apparel industry is especially devastating because it was the United States that enabled this growth in the first place by exempting third-country inputs (i.e., fabric) from tariffs. In its AGOA report, USTR noted that the provision that allows fabric from third countries to qualify for duty free treatment is “a critical factor in apparel companies’ decisions to invest in AGOA-eligible countries.”

Assuming that the countries with the highest tariffs lose access to the US market, we found that the impact on GDP could be significant, especially for Lesotho and Madagascar.

Tariffs are also creating distortions within Africa. Kenya is also a major exporter of apparel, but with a 20 percent tariff is now relatively more competitive. In fact, the new tariff regime has thrown the entire global apparel industry into chaos, as major exporters including China, India, Bangladesh, Indonesia, and Vietnam are facing prohibitive tariffs of 44, 36, 47, 42, and 56 percent respectively.

The United States is also an important export destination for South Africa, but South Africa will be better positioned to weather the shock, with its more diversified economy.

It is hard to fathom that the Administration set out to destabilize poor African countries and unclear what they hope to gain. AGOA’s trade volumes are a tiny fraction of total US trade, accounting for 0.67 percent in 2023, nearly half of which was oil.

The political environment does not seem conducive to a renewal of AGOA, but extending it should be the obvious choice, given the benefits of the program and the miniscule cost to the United States. In the current climate, however, our best hope is that Africa experts in US agencies can persuade the architects of this scheme to remedy this inexplicably cruel situation.