AGOA disaster for South Africa

President Donald Trump’s tariffs on most US trading partners will undermine a 25-year-old pact that gave many of the poorest African nations duty-free access to the world’s biggest economy.

Trump’s tariffs — as high as 50% on the kingdom of Lesotho — will supersede the African Growth and Opportunities Act (AGOA), said a White House official, speaking on condition of anonymity to discuss the details of the tariff plan.

AGOA was endorsed by the US Congress and signed into law by former President Bill Clinton in May 2000.

Axing concessional trade access weeks after Trump froze billions of dollars of aid for Africa will inflict further economic damage to countries including Lesotho, Madagascar and Mauritius.

Not only do the nations lose a duty-free path to US consumers, they also have to endure hefty levies putting thousands of jobs at risk.

To understand the impact of losing the benefit, just look at Ethiopia.

The nation was removed from AGOA in 2021 because of a civil war that spawned a humanitarian crisis in the Horn of Africa nation.

That resulted in 18 companies including PVH Corp., the owner of the Calvin Klein and Tommy Hilfiger brands, exiting the country, according to the National Bank of Ethiopia.

As many as 11,479 jobs were lost, the Ethiopian central bank said.

“The African Growth and Opportunity Act is effectively dead in the water,” Jacques Nel, head of Africa Macro at Oxford Economics, wrote in a client note.

“From an African perspective, Lesotho will endure the most severe direct impact, but the repercussions for global supply chains and economic prospects in other trading partners mean no economy will be unscathed.”

Lesotho forecasts that Trump’s tariff puts 12,000 textile jobs in 11 factories at risk, Minister of Trade and Industry Mokhethi Shelile said.

That’s a third of the jobs in the industry, which is the largest formal employer in the country after the government.

The tariffs “literally will devastate” Lesotho, the country of 2.3 million people that relies on exports of diamonds and clothes, Parks Tau, South Africa’s trade minister, told reporters on Thursday.

The nation, which is surrounded by South Africa, depends on its neighbour for 85% of its imports.

“The loss of AGOA will regress efforts made by African government’s to diversify their economies away from extractive industries, a policy previously promoted by the US to help low income countries achieve export-driven growth.

“African markets won’t be able to absorb the goods, forcing them to seek markets elsewhere, otherwise they risk downsizing, shedding jobs and even closing.”

— Yvonne Mgango, Africa economist

Tau said the move to nullify the benefits of AGOA might be challenged in US courts.

The pact is set to expire in September and the White House declined to comment on whether Trump would support an extension.

About 30 African nations exported $8.4 billion of cars, oil and garments to the US last year, according to South Africa-based Tralac Trade Law Centre.

The US president exempted energy and energy products from the tariffs, alongside copper and certain critical minerals. That spares countries including Angola, Nigeria and Gabon from most of the impact.

The US calculated the rates based on a formula that divides a country’s trade surplus with America by its total exports, based on data from the US Census Bureau for 2024.

That number was then divided by two, producing the “discounted” rate.

The move marks an about-face in American trade policy following World War II that promoted economic integration as a means to help developing nations and advance Washington’s interests abroad.

While Clinton offered duty-free access for more than 1,800 products, former President George W. Bush expanded it in 2004 and promoted initiatives that would help countries bring products to US consumers.

“The US represented 7.45% of South Africa’s total exports in 2024, while South Africa accounted for only 0.4% of US total imports,” the Department of International Relations and Cooperation said in a statement.

The nation “does not constitute a threat to US and where there is a trade imbalance in favour of South Africa,” it’s mainly inputs for US companies, it said.