Jitters over Trump's 10pc tariff as data shows dip in EPZ jobs

Workers in the manufacturing sector, particularly those working in the Export Processing Zones (EPZs) are staring at job losses  following the United States’ (US) imposition of a 10 per cent tariff on Kenyan products.

The latest data shows 7,369 people lost their livelihoods in 2023.

Manufacturers, through their lobby, Kenya Manufacturers Association (KAM) have implored the government to find a way to avert this impending consequence, even as they stare at losses to the tune of millions of shillings, considering their existing contracts that do not factor in the 10 per cent tariff.

While President William Ruto met with the American delegation over the weekend, no news in relation to the tariff has been conveyed.

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President Trump’s 10 per cent tariff consequently means Kenyan exporters have to shoulder this percentage in their margins if they want to continue ferrying products to the US market.

This is because these contracts are under the African Growth and Opportunity Act (Agoa), which allows Kenya and exporters from select countries on the continent to ferry products to the US duty-free.

Manufacturers have raised concerns about the possibility of goods already in transit being stuck at sea due to the tariff that seeks to encourage the consumption of American-made goods.

“Kenya’s exports to the US, previously duty-free under Agoa, will now be subject to additional costs, reducing their market competitiveness,” said KAM chief executive Tobias Alando.

With shipments already sailing under duty-free agreements, manufacturers are desperately seeking a lifeline from the US government to avert a potential trade disaster that has now put thousands of jobs back home at risk at the EPZs.

Latest data from KAM as contained in their just-released Manufacturing Priority Agenda 2025 shows more than 7,000 jobs were lost in 2023 as exports to the US dipped.

US Tariffs Threaten Kenya’s EPZ Jobs

The 7,369 jobs lost is a figure that now seems like a premonition of what is likely to happen in the face of the tariff.

While Kenya National Chamber of Commerce and Industry (KNCCI) argues that the tariff could work to Kenya’s advantage, KAM paints a grimmer picture of the future of jobs in the country.

KNCCI says this is an opportunity for Kenya to grow the textile sub-sector in manufacturing considering the 10 per cent tariff is lower compared to competitors, citing Vietnam’s 46 per cent, Sri Lanka’s 44 per cent, Bangladesh’s 37 per cent, China’s 34 per cent, Pakistan’s 29 per cent and India’s 26 per cent.

“This comparative advantage positions Kenya as an attractive alternative sourcing hub for US buyers seeking cost-effective solutions,” said KNCCI in a statement.

However, Mr Alando argues that the tariff overrides the existing Agoa agreement which Kenya and a select countries on the continent have been enjoying duty free market access to the US.

“Over the years, Agoa has had significant economic and social impact in Kenya, creating over 58,000 direct and approximately 100,000 indirect jobs within the apparel sector alone,” said Mr Alando.

KAM raises fears that the 10 per cent tariff will have a detrimental effect on active contracts currently under Agoa, which could mean losses for enterprises exporting to the US market. Agoa expires in September 2025.

“Contracts currently based on zero per cent Agoa preferential treatment will be affected, potentially forcing Kenyan manufacturers to absorb extra costs,” he said in a statement.

Data from KAM shows exports to the US dipped, which contributed to reduced value of products sold outside the country from EPZs to Sh105.0 billion in 2023 from Sh106.6 billion in 2022.

Kenya’s textile exports to US at risk

Before then, exports and jobs at EPZs had been going up from 61,055 jobs in 2019 to 83,752 in 2022, except in 2020 due to Covid-19, when the number dipped to 56,940.

The value of exports, however, has seen a steady growth from Sh68.6 billion in 2019, Sh74.4 billion in 2020, Sh90.2 billion in 2021, and Sh106.6 billion in 2022, followed by a drop in 2023 to 105.0 billion.

But while exports dropped in 2023 as well as jobs, the number of enterprises in operation and the amount of capital investment in the EPZs increased, indicating confidence by businesses despite the drop. The number of enterprises operating rose from 157 in 2022 to 170 in 2023 while capital investment shot to Sh146.4 billion in 2023 from Sh134.7 billion in 2022.

While the 2022 numbers are verified, KAM says the 2023 figures are based on their own calculations. “Direct employment in the EPZs decreased by 8.8 per cent to 76,383 persons in 2023 compared to 83,752 persons in 2022, mainly due to reduced demand from leading export destinations such as the US,” the KAM document states.

It adds that the value of exports dropped by 1.5 per cent to Sh105 billion in 2023 from Sh106.6 billion in 2022.

“The value of capital investment in these zones increased by 8.7 per cent to Sh146.4 billion in 2023, from Sh134.7 billion in 2022. The growth was a result of the new enterprises that entered the programme as well as the expansion of the existing ones,” the document says.

“However, total sales from EPZs decreased to Sh111.4 billion in 2023 from Sh116.3 billion in 2022.”

This performance raises anxiety for the manufacturing sector responsible for over 362,300 jobs in 2023 as this number, which grew from Sh352,600 in 2022, is anticipated to drop due to the 10 per cent tariff President Trump’s administration has levied on Kenyan products.

The US is a crucial export destination for Kenya, with the tariffs now threatening Sh72 billion in annual exports and potentially impacting 600,000 jobs.

White House

Apparel, predominantly manufactured in Kenya under Agoa, constitutes 72 per cent of these exports, a sector responsible for an estimated 58,000 direct and 100,000 indirect jobs.

In imposing the tariff, The White House said, was the key reason why Trump was elected. The White House also argued that studies have repeatedly shown that tariffs can be an effective tool for reducing or eliminating threats that impair US national security and achieving economic and strategic objectives.

It cites a 2024 study on the effects of President Trump’s tariffs in his first term, which found that they “strengthened the US economy” and “led to significant reshoring” in industries like manufacturing and steel production.

“These tariffs are central to President Trump’s plan to reverse the economic damage left by President Biden and put America on a path to a new golden age,” The White House said while announcing the tariffs on April 5, 2025.

While China, a major economic competitor to the US, especially in the manufacturing sector, has always been seen as the target of President Trump’s onslaught, the consequence of these tariffs is already being seen, considering other major markets are also retaliating with similar charges on US exports to their turf.

On Thursday, IMF Managing Director Kristalina Georgieva expressed serious concerns about the broader global implications of the US tariffs.

“We are still assessing the macroeconomic implications of the announced tariff measures, but they represent a significant risk to the global outlook at a time of sluggish growth,” Georgieva said. “It is important to avoid steps that could further harm the world economy. We appeal to the US and its trading partners to work constructively to resolve trade tensions and reduce uncertainty.”

Adding to the volatile global trade landscape, China on Friday announced countermeasures against the US tariffs, including additional 34 per cent tariffs on all US goods and curbs on the export of some rare earths.

The US stock market took a pounding after China’s announcement. The Dow Jones Industrial Average dropped more than 1,000 points, and the S&P 500 was down 2.8 per cent coming off its worst day since 2020.

To avert a potential trade crisis, KAM urged the government to engage in immediate and sustained high-level bilateral negotiations with the US administration with one of the issues on the table being extension of Agoa beyond the September 2025 expiry.

“Extension of Agoa beyond its expiry, ensuring continued benefits for Kenya, Africa, and the US, through job creation, improved livelihoods, industrial growth, and investment opportunities,” said Alando.