Trump tariffs threaten Kenya's Sh72b exports

Kenyan exporters to the United States face significant uncertainty after President Donald Trump announced a sweeping new set of tariffs, including a cumulative 20 per cent levy on Kenyan goods, threatening Sh72 billion in annual exports and potentially impacting thousands of jobs. 

Trump’s move sent economic shockwaves globally.

Trump, in a White House address on Wednesday, declared the tariffs would herald a “reborn” American industry. 

He imposed a “baseline” 10 per cent tariff on all imports, with an additional 10 per cent levied on Kenya due to perceived trade imbalances and alleged currency manipulation.

Tariffs are taxes imposed on imported goods, making them less competitive compared to domestically produced items. For Kenyan exporters, this translates to higher prices for US consumers, potentially reducing demand and export volumes.

Experts, producers, and officials on Thursday expressed fears that the tariffs, imposed via executive order, directly undermine Kenya’s ="https://www.standardmedia.co.ke/business/business/article/2001515445/key-details-on-trumps-market-shaking-tariffs">preferential trade access< under the African Growth and Opportunity Act (AGOA). 

AGOA, which allows duty-free access products to the US, is a cornerstone of Kenya’s trade relationship with its largest export market. 

The Sh72 billion annual export figure is based on Kenya National Bureau of Statistics data.

“We are yet to unpack to see the full impact,” Carole Kariuki, chief executive of the Kenya Private Sector Alliance told The Standard.

Among the reasons the US cited when it hit different countries with different tariffs included ="https://www.standardmedia.co.ke/business/business/article/2001515363/stock-markets-mixed-as-uncertainty-rules-ahead-of-trump-tariffs">currency manipulation<. Washington has repeatedly stressed the need for Kenya to “avoid manipulating exchange rates,” a pre-condition for any future trade agreement. 

Trump’s administration yesterday cited this concern, alongside trade imbalances, to justify the tariffs.

“Increased reliance on foreign producers has left the US supply chain vulnerable,” Trump stated, defending the tariffs as vital to protect domestic manufacturing and rectify trade imbalances.

Prof XN Iraki of the University of Nairobi’s School of Business said Kenyan goods destined for the US would become more expensive.

This will likely cut jobs, including those working for firms in the Export Processing Zones that produce clothing items for the US market under AGOA, he said.

“Kenyans goods (and services) will become expensive, and exports may fall with jobs lost along the supply chain. We may have to look for alternative markets,” Iraki said, adding that Kenya may not be in a position to hit the US with higher tariffs as a way of reciprocating.

“It’s unlikely we shall reciprocate with our  tariffs because the US may make matters worse.”

In 2023, 79 per cent of Kenya’s US-bound exports, primarily textiles, apparel, and agricultural products like coffee and cut flowers, entered duty-free via AGOA. 

Other goods enjoyed minimal tariffs under programs like the Generalized System of Preferences (GSP), resulting in an average US tariff of just 0.3 per cent. This will now drastically change.

However, the government yesterday said the tariffs are manageable. Trade Cabinet Secretary Lee Kinyanjui said Kenya’s exports still have a competitive edge as other countries are facing high tariffs.

He said the higher tariffs, especially on some of Kenya’s competitors to the US market presented an opportunity for the country as their apparels will become more expensive. 

Key textile exporting competitors that have been slapped with higher tariffs include Vietnam (46 per cent), Sri Lanka (44 per cent), Bangladesh (37 per cent), China (34 per cent), Pakistan (29 per cent and India (26 per cent).

“The major challenge posed by the US reciprocal tariff is the ="https://www.standardmedia.co.ke/world/article/2001515441/what-the-world-said-about-trumps-tariffs">increased costs< for Kenyan exports. While the 10 per cent tariff is lower than  the competitors’ tariffs, it still raises the cost of Kenyan businesses exporting to the US,” said Kinyanjui.

“Supply chain adjustments will be necessary, such as expanding production to meet new demand. This will require investment in infrastructure, technology and skills development.”

Foreign Affairs PS Korir Sing’oei had earlier said that the impact on Kenya may not be much, noting that the tariff is one of the lowest imposed by Trump.

“While the tariffs may be one of the lowest, we shall be vigorously advocating for their waiver,” the PS posted on his Twitter handle.

Analysts, however, noted that Kenya should not depend on the misfortune of others to thrive but strengthen its one capacity to produce.

Iraki noted that one player “should not win because other players are playing badly”.

While the government is putting on a brave face, Kenya is already struggling with exports to the US generally including the items exported under AGOA coming under pressure.

In 2023, Kenya exported goods worth Sh64.3 billion, which was a decline from Sh79.9 billion export to the country in 2022, which according to the Kenya National Bureau of Statistics said was due to a decline in exports of products such as macadamia nuts and titanium ores and concentrates.

Articles of apparel and other products exported under Agoa – which accounted for 79 per cent of exports to the US – also dropped to Sh50.8 billion in 2023 from Sh56.7 billion in 2022.