The Trump administration’s nation that cracked down on the highest tariffs this week was a small, rural, landlocked country in southern Africa, one of the poorest countries in the world.
Lesotho made denim the American brand of jeans, suffering a 50% tariff. Among several low-income countries across the continent, people are shocked by the minimum tax rate of nearly all U.S. trading partners. Three-quarters of Madagascar's population lives in poverty and will now receive a 47% tariff when its clothing, herbs and other exports enter the United States.
Products from Algeria, Angola, Botswana, Libya and Mauritius are now subject to tariffs of more than 30%, and South Africa is also subject to special attacks from the Trump administration.
Mr. Trump declared the world trade system to serve the American fool, picking the label for Moochers around the world, which proved the full tariffs.
But Lesotho is hardly a major player in global trade: it imported less than $3 million from the United States and exported $240 million last year.
The African continent has caused tariffs most of the time. Just a few weeks ago, the Trump administration terminated billions of dollars in aid to Africa, which has enabled health care systems and disaster relief efforts in many countries.
Meanwhile, governments across the continent are dealing with more than $1.1 trillion in foreign debt. Many people are paying off loans rather than health care or education.
In most cases, manufacturing exports from Africa to the United States are small. But for countries like Lesotho, the impact of tariffs is huge. Exports of denim and diamonds account for one tenth of the country's GDP.
This will “destroy the economy,” said Jacques Nel, head of African macroscopy at research firm Oxford Economics. Lesotho is already a poor country. Its population is 2 million, its national output is about $2 billion per year and its per capita income is $975.
“It has nothing to do with the actual tariffs,” Nell said. “They can't import a lot from the United States because they don't have a lot of money.”
The textile industry is Lesotho's largest private employer and produces its first export. The industry was nurtured after the passage of the African Growth and Opportunity Act in 2000. The bill aims to promote manufacturing across the continent, and the law removes most tariffs on goods from sub-Saharan Africa. The law will expire later this year, although Mr. Trump effectively ended it this week.
The Lesotho factory made clothes, especially denim, for manufacturers such as Levi and Wrangler. Although Mr. Trump recently called Lesotho a “nation that no one has ever heard of”, his own Trump-branded Greg Norman golf shirt has been labeled “Made in Lesotho”.
Lesotho's trade minister Mokhethi Shelile said the country has 11 factories that employ 12,000 workers. 70% of the products they produce are exported to the United States. “We are a small economy,” Hillier said. “We just have to talk to the U.S. government because tariffs are not based on facts.”
Other top textile exporters in Africa, such as Madagascar (47% tariff) and Kenya (10%), will also feel sting.
Thea Fourie in S&P Global Market Intelligence said that this will be the biggest impact as South Africa engages in more trade with the United States, exports of cars, agricultural supplies, etc.
African countries whose main exports are energy or certain key minerals, as the government has exempted tariffs on these items.
China has been working to encourage trade despite the U.S. tariffs on relatively few goods in Africa (worth $39 billion last year). It eliminated all import duties on products from 33 African countries in December.
A bigger concern is the anticipated impact of tariffs on the global economy. Over the past week, the outlook has become dim and analysts expect slower growth.
“Even African countries are not facing very high tariffs,” said Jayati Ghosh, an economist at Amherst University in Massachusetts.
Like any global recession, the poorest countries will feel the sharpest impact. Intensifying economic outlook could slow trade with other partners such as China and Europe. It also discourages investors.
If inflation prompts central banks to raise interest rates, African countries with huge debt burdens will hit double the blow. Their loan payments (mostly priced in US dollars) will increase while they are able to earn foreign exchange through exports.
Mavis Owusu-Gyamfi, president and CEO of the African Center for Economic Transformation, said the only way forward is to develop regional trade networks within the continent, which is a long-term goal.
She said the mainland must look for “opportunities to establish intra-Africa trade.”
Zimasa Matiwane contributed to Lesotho's coverage.
