Some say Africa should present a unified response to US tariffs – but is that possible?
It is hard to discern a continental pattern in United States (US) President Donald Trump’s new ‘reciprocal’ import tariffs imposed on African countries last week. It is also difficult to discern whether a unified response by Africa is possible or desirable.
Thirty-two of Africa’s 54 nations got the global minimum rate of 10%, 18 countries got 15%, Tunisia got 25% and South Africa, Algeria and Libya got 30%.
Trump’s new tariff rates presented on 31 July corrected some of the grosser anomalies in his April announcement. Notably, Lesotho’s astronomical tariff of 50% was reduced to 15%. But some, like South Africa’s rate, stayed the same despite vigorous government lobbying to reduce it.
In April, Trump imposed high tariffs on many countries, aiming to wipe out trade deficits. But the tariff amount was based on individual nations’ trade deficits rather than on their actual barriers to US trade.
Lesotho fell foul of the formula because it is surrounded by South Africa, and so imports most of its goods from there and very little from the US – only US$2.8 million last year. Conversely, Lesotho exported a relatively large amount of goods (worth about US$273.3 million) to the US, mainly garments via the African Growth and Opportunity Act, and diamonds.
It is unclear how the US arrived at last week’s revised tariffs, but there appeared to be no formula applied, since most African countries got 10% or 15%, apart from the four outliers.
So it seems political factors played a prominent role in some cases. This is clear for South Africa, as Trump has raged against the country for its Expropriation Act and alleged ‘genocide’ against white Afrikaners – for which there is no evidence. Pretoria’s decision to take Israel to the International Court of Justice for alleged genocide in Gaza was likely also a factor.
Algeria was presumably targeted because of its hostility to Morocco, a member of Trump’s Abraham Accords with Arab nations. The reason for Libya and Tunisia’s high rates is unclear.
If there is any economic rationale behind any of the tariffs, it hasn’t been well thought through. Lesotho’s reduction to 15% looks dramatic, but Trade and Industry Minister Mokhethi Shelile says it still leaves the country at a fatal competitive disadvantage – in the export of garments to the US – to Kenya and Eswatini especially, which got only 10% tariffs last week.
Having switched its Africa policy from aid to trade, one might have expected that the US would have been sensitive to concerns like those of Lesotho – and perhaps it will still be sympathetic to Lesotho’s lobbying.
Although some analysts and trade experts have called for a unified African response to Trump’s tariff assault, there has so far been no sign of one, either from the African Union (AU) or elsewhere.
Wamkele Mene, Secretary-General of the African Continental Free Trade Area (AfCFTA), said African countries must unify trade policies to deal with the disruption caused by Trump’s tariffs. ‘The good news out of this crisis is that our heads of state understand that there is not a single market in Africa that will survive on its own,’ Mene told CNBC Africa in April.
‘We are not going to be able to negotiate bilaterally successfully. I think that’s clear. We will have to leverage on our combined efforts, our combined market size, market share, and combined population size.’
However Daniel Bradlow, an economic diplomacy expert at the University of Pretoria and South African Institute of International Affairs, says: ‘It seems to me it’s idealistic to think that the whole of 54 countries can agree on one strategy for the whole continent, and that the US would accept that.
‘The problem with trying to negotiate like that is it’s too easy for the US to divide and conquer,’ he told ISS Today. ‘It can offer Kenya or South Africa, say, too good a deal for them to say no. And that sort of breaks them away from a more unified approach. So it seems to me that that’s not a very productive approach. It’s more productive to try and develop the AfCFTA.’
There is also a question of whether Africa could negotiate as a single entity since it does not have a continent-wide customs union or common market, so cannot have a common external tariff with an outside country. (Although sub-regional groups have negotiated free trade deals with the European Union.)
But Bradlow is right – and Mene concurs – in proposing that Africa must now diversify its markets and strengthen intra-African trade, which remains the lowest among global regions at under 20%. And that means accelerating AfCFTA implementation, which is taking too long to get off the ground. Perhaps Trump’s tariff assault will hurry them up.
Few other African countries match the volume of South Africa’s exports to the US, particularly when you subtract the goods exempted from the new tariffs, like oil and minerals, which are of strategic value to Washington.
But we have seen how for countries like Lesotho, even relatively low values of exports are critical. And forthcoming United Nations Economic Commission for Africa (UNECA), AU Commission and African Development Bank joint research suggests that new US import tariffs could reduce Africa’s exports to the US by up to 21.5%.
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‘This goes beyond trade volumes,’ says UNECA Executive Secretary Claver Gatete. ‘It affects industrial jobs, regional supply chains and Africa’s voice in shaping the terms of engagement.’ He urged countries to mobilise domestic resources to withstand a deteriorating external environment of rising tariffs and falling aid.
Although individual African states are continuing to negotiate with the US, the focus is beginning to shift from mitigation to adaptation. South Africa, for instance, is establishing an Export Support Desk to help firms cope, and announced it would implement measures to cushion the blow for key affected industries like autos and agriculture.
Meanwhile, America’s aggressive protectionism offers an opportunity for its chief global rival, China, which is throwing African countries a lifeline by dropping import tariffs on nearly all of them, Nigerian economist Bismarck Rewane told CNN.
Still it’s hard to do without the world’s largest economy. Perhaps the best Africa and the world can hope for is that the pandemonium caused by Trump’s trade policy will boomerang on America – as seems to be happening already – and force him to recant.
Meanwhile, African countries should accelerate AfCFTA’s implementation and strengthen their domestic economies against this perfect storm of rising tariffs and plunging aid.
Peter Fabricius, Consultant, ISS Pretoria