CBK rejects Trump currency manipulation claims amid Sh12.9b tariffs hit

Kenya has refuted allegations of currency manipulation leveled by the Trump administration.

This is even as Nairobi acknowledges a potential $100 million (Sh12.9 billion ) hit to the country’s export earnings from newly imposed US tariffs. 

Central Bank of Kenya (CBK) Governor Kamau Thugge, while speaking at a virtual press briefing on Wednesday following the Monetary Policy Committee (MPC) meeting, asserted that the CBK's interventions in the foreign exchange market were solely aimed at smoothing out volatility, not manipulating the shilling's exchange rate for trade advantage.

"The shilling's exchange rate is determined by the forces of supply and demand, and all we have really tried to do is to avoid fluctuation and volatility," Dr Thugge stated, defending the apex bank's currency management strategy. "I think our strategy has worked very well."

His comments came in the wake of the Trump administration's decision to impose a 10 per cent tariff on Kenyan goods, citing concerns over ="https://www.standardmedia.co.ke/business/business/article/2001515440/trump-imposes-10pc-tariffs-on-kenyan-goods">alleged currency manipulation< and trade imbalances.

The tariff, which took effect on Wednesday, has cast a long shadow over trade relations between Nairobi and Washington, particularly as the African Growth and Opportunity Act (AGOA) trade framework nears its September expiry.

The CBK governor revealed that preliminary assessments by the National Treasury indicate the tariff could reduce Kenya's exports to the US by approximately $100 million, equivalent to Sh12.9 billion.

"We are working on the impact of the tariffs and what impact it is expected to have on our economy," Dr Thugge said.

"In terms of our GDP, that $100 million would not have any significant impact on the overall balance of payments."

Despite the trade headwinds, the CBK Governor painted a relatively stable picture of Kenya's external sector.

"We've had very good performance in terms of exports; we've had good performance in terms of the current account deficit, which has been relatively steady," he noted, adding that the country had also witnessed "significant capital inflows."

He emphasised that the CBK's policy had allowed for the building of international reserves to their highest level yet.

The Trump administration had previously raised concerns about Kenya's currency practices, demanding commitments to end alleged manipulation as a precondition for a new free trade agreement.

While the former Biden administration did not designate Kenya as a currency manipulator, the Trump administration has renewed these concerns, directly linking them to the newly implemented tariffs.

CBK has ="https://www.standardmedia.co.ke/business/business/article/2001515531/trump-tariffs-threaten-kenyas-sh72b-exports">consistently denied targeting< the shilling's exchange rate, a stance reiterated by Dr Thugge.

The governor emphasised that the stability of the shilling, which has traded steadily against the dollar in recent months, was a result of market forces and the CBK's efforts to avoid excessive volatility.

Analysts say the imposition of tariffs, even if the immediate economic impact is deemed manageable by CBK, could have longer-term implications for trade relations and investor sentiment.

The dispute over currency practices could also ="https://www.standardmedia.co.ke/amp/business/article/2001516044/ruto-vows-fight-back-against-trump-tariffs-on-kenyan-goods">complicate future trade negotiations< between the two nations.

CBK's efforts to reassure markets and engage with US authorities will be closely watched in the coming weeks.

Manufacturers recently warned of a potential trade disaster, with shipments sailing under AGOA now facing an unexpected 10 per cent levy.

The Kenya Association of Manufacturers (KAM) urgently appealed to the US government for a transitional clause to exempt these goods, fearing they would be held up, incur storage fees, and become unsellable.

The Kenya National Chamber of Commerce and Industry (KNCCI) echoed these concerns, emphasising increased costs for exporters.

"Contracts currently based on zero (0 per cent) AGOA preferential treatment will be affected, potentially forcing Kenyan manufacturers to absorb extra costs," KAM stated, highlighting the precarious position of exporters reliant on the US market, which accounts for Sh72 billion in annual exports and supports an estimated 600,000 jobs. Apparel, constituting 72 per cent of these exports, is particularly vulnerable.

Manufacturers said the tariff negates their duty-free advantage under AGOA, significantly undermining their competitiveness.

The move comes amid broader global trade tensions, with the IMF expressing concerns about the risks to global growth and China announcing countermeasures against US tariffs.

To avert a crisis, KAM urged the Kenyan government to engage in immediate high-level negotiations with the US administration, seeking an extension of AGOA beyond its September 2025 expiry, a reversal of the tariff, and, crucially, a transitional clause for shipments already en route.

Dr Thugge indicated ongoing discussions with international financial institutions, hinting at potential financial support during the spring meetings.

While defending the shilling's management, the immediate challenge for Kenyan manufacturers is navigating the abrupt imposition of tariffs and the threat of their goods being stranded.