The country the Trump administration slapped with the worst tariffs this week is South Africa's small, rural inland country, the poorest country in the world.
Lesotho, which makes denim that goes into American brand jeans, suffered a 50% tariff. It was one of several low-income countries on the continent, and was shocked by the minimum taxation imposed on almost all American trading partners. Madagascar, where three-quarters of its population is in poverty, is filled with 47% tariffs when apparel, vanilla and other exports enter the United States.
All products from Algeria, Angola, Botswana, Libya and Mauritius have tariffs of more than 30%, just like South Africa, which is under certain attacks by the Trump administration.
Trump justified the full tariffs by declaring that the global trading system played the US for Champ, who picked up the tab for the world's Moohees.
However, Lesotho is not a major player in world trade. It imported goods under $3 million from the US and exported $240 million last year.
Tariffs arise as much of the African continent is already caught up in. Just a few weeks ago, the Trump administration ended billions of dollars in aid to Africa, which has carried out health systems and disaster relief efforts in many countries.
At the same time, governments across the continent are dealing with foreign debt loads of over $1.1 trillion. Many people spend more on loan repayments than healthcare or education.
In most cases, exports manufactured from Africa to the US are very small. However, for a country like Lesotho, the impact of tariffs is enormous. Denim and diamond exports account for more than a tenth of gross domestic product.
Jacknell, head of African macros at research firm Oxford Economics, said this would “destroy the economy.” Lesotho is already a poor country. It has a population of 2 million, with total national production of around $2 billion per year, with annual income of $975 per capita.
“This has nothing to do with actual tariffs,” Nell said. “They don't have a lot of money, so they can't import a lot from the US.”
The textile industry is Lesotho's largest private employer and produces its number one export. The sector was nurtured after the US passed the African Growth and Opportunity Act in 2000. Designed to boost manufacturing across the continent, the law excluded most obligations for goods from sub-Saharan Africa. Trump effectively ended it this week, but the law will expire later this year.
The Lesotho factory is taking denim in particular for manufacturers such as Levi and Wrangler. And while Trump recently called Lesotho a country “no one ever heard of it,” his own Trump brand Greg Norman golf shirt features a label “made in Lesotho.”
Lesotho's trade minister, Moketi Sherle, said the country has 11 factories employing 12,000 workers. 70% of what they produce is exported to the US. “We're a small economy,” Schale said. “We have to talk to the US administration because tariffs are not based on facts.”
Other top African textile exporters, such as Madagascar (47% tariffs) and Kenya (10%), also feel the stab wounds.
South Africa will be most affected as it exports cars, agricultural products and more as it trades more with the US, says Thea Fourie of S&P Global Market Intelligence.
African countries where major exports are energy or certain important minerals are exempt as the regime exempts those items from tariffs.
The US is leviing tariffs on relatively small amounts of goods from Africa, worth just $39 billion last year, while China is trying to encourage trade. In December, it eliminated all import operations of its products from 33 African countries.
The bigger concern is the knock-on effect that tariffs are expected to have on the global economy. The outlook has dimmed over the past week, with analysts hoping to grow slower.
“Even African countries that are not facing very high tariffs will be suffering,” said Jayati Ghosh, an economist at the University of Massachusetts.
As with the case of a global recession, the poorest countries will feel the sharpest effect. Deteriorating the economic outlook could slow trade with other partners, such as China and Europe. It also discourages investors.
If inflation encourages central banks to raise interest rates, African countries with large debt burdens are due to double whammy. Their loan payments – most of them priced in dollars – increase at the same time as their ability to acquire foreign exchange through exports becomes crippled.
Mavis Owusu-Gyamfi, president and CEO of the Centre for Economic Change of Africa, said it was the only way to develop a long-term goal: regional trade networks within the continent.
The continent needs to look for “opportunities to build intra-African trade,” she said.
Zimasa Matiwane contributed a report from Lesotho.
