Trump’s Tariffs to Disrupt Kenya’s Growth
With Donald Trump’s administration allowing a self-imposed trade deadline to expire on August 1st, a cascading effect of new tariffs was released on a list of 69 countries. The decision, part of “America First” Trade Reset was intended to punish what Washington deemed unfair trading relationships. While headlines largely focused on China, South Africa, and Europe, much of Africa, including Kenya, has found itself unexpectedly drawn into the fray.
While many African nations woke up to punitive tariffs as high as 30%, Kenya was spared the most severe penalties compared to Algeria, Uganda, South Africa, and Tunisia. However, the relief is short-lived. With Kenya lacking a bilateral agreement or formal exemption, the country faces the baseline 10% tariff on most of its imports into the United States. Considering most of its trade ties with the U.S have long been propped up by preferential access, the quiet shift could prove more damaging that most realize.
A Death by Default
The imposed 10% tariff is bearable compared to some African nations but it increases tariffs on Kenyan exports from 0.3%, a 30-times increase. While it is not an explicit sanction or punishment, it is a consequence of omission which is concerning. Nations that failed to sign specific bilateral deals with the U.S. by the August deadline were automatically assigned a default tariff rate. For Kenya, the risk is further compounded by the staled bilateral negotiation and uncertainty over the African Growth and Opportunity Act (AGOA) set to expire in September, this year.
Government officials in Nairobi have publicly downplayed the impact of the ongoing trade fallout. While 10% is moderate compared to highs of 30% experienced, such complacency ignores the structural vulnerabilities within Kenya’s export economy. The severity of it could further be expected in the post-AGOA environment.
The AGOA Dilemma
Kenya has benefitted from the AGOA deal for more than two decades, a trade program that allows sub-Saharan African exports duty free access to the American Market. Without the AGOA deal, the 30-times higher tariffs could significantly lead to a reduction in earnings from good exports to the US unless the demand remains unaffected. AGOA has been a corner stone in Kenya’s growth of exports, particularly in the textiles and apparel industry. Approximately 66,000 jobs in the garment manufacturing sector for instance are expected to be impacted due to goods exposure to tariffs, higher prices, and loss of competitiveness in the U.S. market.
“If Kenya wishes to remain a viable U.S. trade partner, it must reclaim its place at the negotiating table and boost competitiveness through productivity, cost efficiency, and strategic trade agreements rather than relying on temporary tariff waivers.”
The Trump administration, ideologically opposed to non-reciprocal trade preferences, has shown little appetite for maintaining AGOA in its current form. Moreover, without an updated bilateral agreement, there is no guarantee that Kenya will retain eligibility. This will certainly result in the expiration of duty-free privileges and the imposition of a 10% tariff. For buyers of Kenyan apparel, horticulture, or coffee, this tariff effectively acts as a tax on preference. In competitive global supply chains, that is more than enough to shift sourcing decisions elsewhere.
A Thin Margin, a Heavy Burden
The 10% imposed on Kenya can be decisive in global trade. The increase for the highly competitive textile industry for instance can render Kenyan goods uncompetitive. The nation can expect the exposure to result in stiffer competition, resource tradeoffs, and reduced margins for all the exporters. This manifests as US consumers shift demand towards cheaper alternatives or reduce demanded quantities effectively reducing exports, particularly if the AGOA deal remains unresolved.
This new development spells doom for factory workers in Athi River export processing zones as well as flower and Macadamia farmers in Thika among other stakeholders. Thus, even if Kenya continues to export under the seemingly fair 10% compared to peers, it will be doing so from a weakened negotiation position.
The country’s export sector trade can be expected to become more uncertain, volumes more volatile, and the balance of payments for strained. This is considering that that Kenya feeds less than 1% of the product export market to the US and often with unilateral non-tariff and quota free concessions. Fewer exports mean fewer dollars entering the economy, which, in turn, puts pressure on the Kenyan shilling, raises the cost of imports, and feeds domestic inflation.
Diplomatic Drift
The coming into effect of the 10% tariff is also an indication of Kenya’s stalled trade diplomacy with the United States. In 2020, former President Uhuru Kenyatta launched formal FTA negotiations with Trump seeking to generate AGOA benefits but the talks have since languished.
In the absence of concluded FTA or alternative bilateral mechanisms, Kenya stands between past privileges and future uncertainty. The 10% tariff manifests both as an economic burden for Kenya and as an indicator of diminished strategic leverage in Washington. Kenya has long relied on trade preferences to sustain its export performance. But in a world turning toward bilateralism, protectionism, and supply chain resilience, preferential access is no longer a given.
In response therefore, reviving talks with the U.S. should be a top priority for Nairobi, not only to remove the 10% tariff but to secure long-term market certainty. Further, Kenya needs to diversify her export base such as by deepening its integration into the African Continental Free Trade Area (AfCFTA), and pursue competitiveness reforms at home. This translates to the need for lowering the cost of production, improving port logistics, reducing corruption leakages, and investing in infrastructure for faster and cheaper goods movement.
Between Preference and Performance
While Kenya is not on Trump’s bucket list of the naughtiest, it certainly lies in the margins. The baseline tariff is a reminder that the modern-day trade order demands preparedness for survival. Default rates are indicators of missed opportunities other than an accident.
If Kenya wishes to remain a viable U.S. trade partner, it must reclaim its place at the negotiating table and boost competitiveness through productivity, cost efficiency, and strategic trade agreements rather than relying on temporary tariff waivers.
This article first appeared on the Initiative For African Trade and Prosperity (IATP) under the same title.
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