Trump tariffs: AGOA, agoing, agone?

Mbongeni Mguni | Tuesday April 22, 2025 14:51

In January, a day after Donald Trump began his second coming as President of the United States, Mmegi published an analysis entitled “US trade deal: What’s AGOA’n on?”.

The essence of the piece was on how US lawmakers have delayed the renewal of the African Growth and Opportunities Act (AGOA), to the point where an unofficial veil of silence had fallen over the deal.

The entry of Trump, who had campaigned on an America-First platform, only threatened to further imperil the renewal of the agreement.

Since 2000, US-Africa trade and economic relations have been based on AGOA, a trade arrangement between the US and sub-Saharan African countries including Botswana, which provides relaxed access to the American market.

Despite impassioned lobbying by African countries for an early renewal of the deal, including talks during the high-level US Africa Leaders’ Summit called by former President Joe Biden in December 2022, AGOA is set to expire this September.

Annually, AGOA involves billions of US dollars in trade and while Botswana’s own exports, which were mainly textile, have declined from their previous billions, resurgent numbers are being seen in diamond jewellery from KGK Diamonds and other non-diamond sectors.

According to US figures, in 2023 US imports under AGOA totalled $9.7 billion, consisting of approximately $4.2 billion in crude oil and $5.5 billion in other products, including $1.1 billion in apparel and more than $900 million in agricultural products.

The delayed renewal and the failure to secure early commitments on the same, have introduced “uncertainty,” the dreaded enemy of commerce that hampers investments, deal-making and adds a risk premium on trade.

Trump’s global tariffs have put paid to this uncertainty, with the US now imposing a minimum 10% tariffs on nearly countries, including uninhabited countries and some which are actually US affiliated territories.

The rug has effectively been pulled from under the African states. While technically, the renewal or reauthorisation of AGOA is led by US lawmakers, Trump holds heavy sway in both houses of Congress and given his global trade tariff posture, he is unlikely to be chomping at the bit to sign off on a new AGOA.

In December, Representative John James, the Chairman of the House Foreign Affairs Committee’s Subcommittee on Africa, introduced legislation seeking the reauthorisation of AGOA to 2037. The legislation is moving through the US Congress, but its intent has already been usurped by Trump’s tariffs as African states under AGOA are also included in the 10% minimum tariff. Essentially, before its expiry in September, African goods exported under AGOA have been stripped of their beneficial status and are subject to the minimum 10% levy when entering the US.

Prior to Trump’s inauguration, Democratic congresswoman, Sheila Cherfilus-McCormick, told a Brookings Institution Foresight Africa dialogue monitored by Mmegi, that the legislators would push hard for AGOA’s renewal.

The Democrats, formerly led by Biden, had pledged to support AGOA’s renewal as part of continuing efforts to boost trade partnerships with Africa, including securing access to critical minerals on the continent, while encouraging American companies to invest in Africa.

“Anytime that time is lapsing and you are staggering, I feel like this shows that something is not a priority,” Cherfilus-McCormick said in January. “When you say ‘we prioritise Africa,’ priority means you don’t wait to reauthorise; it means you reauthorise today. “We have to reauthorise immediately and the conversations of when we will reauthorise or what it will look like, have to be something that ends.”

Cherfilus-McCormick said she was hoping to secure bipartisan consensus towards a quick reauthorisation of AGOA, and expected her extensive relationships across the aisle to count towards that effort.

“I believe in making the US great and this sounds wonderful but when you look at the competition in Africa, we are probably fourth, which is a reality we have to own as the US. “Why are we fourth in terms of working with Africa? “Because we have not been truly prioritising Africa and I’m looking forward to working with my colleagues so that we can be first in Africa. “First in economic incentives, first in helping Africa with its critical minerals so that China is not taking everything out of Africa and processing it.”

Within the continent, African trade leaders are acknowledging the winds of change brought about by the US administration’s new trade outlook. At Afreximbank, the continent's primary trade finance institution with assets of about $40 billion, the conversation for decades has been about boosting intra-African trade and linking up to the economies in the Caribbean, an idea known as Global Africa.

The Bank has over the years sealed numerous investment deals running into billions of dollars aimed at powering trade within the continent, while billion-dollar signings are also ramping up in the Caribbean.

This week speaking at an official event in Cairo, Egypt, Afreximbank president, Prof Benedict Oramah, noted that the winds had clearly changed, with the US’ posture dealing a long-anticipated blow against globalisation.

He explained that around 2015 there was a “glimmer of hope” that Africa would be the next continent that globalisation would help pull out of poverty, “repeating the impressive outcomes in Asia, where it helped pull about one billion people out of poverty”.

According to Oramah, the hope was justified because by that time, labour costs, the major driver of capital flows into labour-intensive manufacturing, were rising rapidly in China, which triggered a search for a “New China” to be the centre of global labour-intensive manufacturing that would help keep global inflation down.

“Nevertheless, the hopes were quickly dashed by a number of factors. “Discontent towards globalisation had reached unprecedented levels in the USA and Europe and brought anti-globalists to power in the USA and some European countries. It also led to BREXIT. “With the coming to power of President Donald Trump in the USA, multilateralism and globalisation took the back seat. “Multiple global shocks, namely the COVID-19 pandemic, the Ukraine and sovereign debt challenges, exacerbated the crisis. “The posture of the US Government, under the second coming of President Trump, is raising alarm about the future of the global economy.”

According to Oramah, with their preference for the use of high tariffs as an instrument for re-balancing US goods trade with the rest of the world, almost all African countries are concerned about the impact on their economies. Another possible significant risk arising from President Trump’s tariff policies is the risk of dumping from more developed economies facing much higher tariffs than Africa.

For Africans who once hoped for an expedited renewal of AGOA, hopes have been dashed. However, the latest challenges come at a time when the continent itself is boosting intra-African trade, meaning trade between African countries, a key continent-wide push to unlock industrialisation and growth amongst economies.

The AfCFTA or African Continental Free Trade Area, is the world’s largest free trade area developed under the auspices of the African Union (AU) to enable the free flow of goods and services across the continent.

Botswana ratified the agreement in February 2023, one of the last states in Africa to do so, giving the country and its businesses access a market of 1.2 billion with a value of more than $3 trillion.

While the AfCFTA continues to suffer from teething troubles that have limited its momentum in encouraging intra-African trade, its ratification by most countries and its support from African and international development finance institutions, makes it a key strength for the continent, as global trade reorganises itself.

“It is not all bad news and gloom! Fortuitously, the continent made a very decisive move in 2018, one that, given recent events, must be celebrated for its foresightedness – the African Continental Free Trade Agreement was unveiled and signed, and it came into force under one year in 2019,” Oramah said in Cairo.

He continued: “If we achieve a truly integrated market of more than 1.3 billion people, with a combined GDP of about three trillion US dollars, a diverse ecosystem and variety of natural resources, we can create our own internal globalisation and be in a position to integrate the African Diaspora and engage the rest of the world more meaningfully.”

The idea of plugging the gap left by the US with Africa sounds appealing. However, it is fraught with challenges, not least of all being the logistical nightmares involved in trade between African nations. Even aviation routes across the continent often involve first flying to a former colonial capital like Paris, then returning to the continent.

Unlocking the Caribbean linkages is similarly challenging as presently no direct flight exists between the continent and the islands. Any traveller from Africa has to first fly to the United States, then the Caribbean, an arrangement that involves transit visas.

Other technical challenges hampering trade in Africa include issues around payments and settlements, incongruent policies, safety and security risks and many others that have limited trade within the continent.

In Africa, most countries’ trade is positioned towards economic powers in Europe, the main states involved in the Scramble for Africa.

The result is that trade and economic policy, as well as infrastructure in Africa, follows the former colonial routes established during and after both the slave trade and colonialism era.

Trade volumes, including tourism with the former colonial powers, for Africa is easier and larger in volume than trade within Africa.

A key innovation in unlocking intra-African trade is the Pan-African Payment and Settlement System (PAPSS), which supports payment for cross-border trade in national currencies. The system, launched by the AU and Afreximbank two years ago, allows African governments and corporates to pay for goods, services, major infrastructure and other investment contracts in their national currencies.

“Through PAPSS, the Government of Uganda can secure the services of an Egyptian contractor to develop a road project in Kampala, with the government paying for such contract in the Ugandan Shilling, which will be used to purchase the Egyptian Pounds to pay the Egyptian contractor,” Oramah explained.

According to the Afreximbank, intra-African trade has grown by almost 600 percent between 1995 and 2022, yet intra-African trade share of Africa’s total trade remains at a paltry level of about 15 percent, just a five percent increase from an average level in the early 1990s.

While African states enhance their efforts at establishing the necessary infrastructure, policies and environments to promote trade within the continent, the US’ negation of AGOA will have an immediate impact.

In the next few months, the Trump administration is expected to make clear which direction it intends to take on global tariffs. For Africans, however, AGOA will sit dead in the water while those negotiations and decisions are made.