Sovereign Africa Ratings

The year 2025 marked a landmark moment in U.S. trade policy, pivoting away from multilateralism toward an aggressive "America First" strategy. This strategy aims to rebalance trade relationships, protect domestic industries, and assert national economic interests by using tariffs as a primary tool to force bilateral negotiations and reshore manufacturing. The administration's rationale extends beyond economics to a broad definition of national security, framing import competition in a wide range of industries as a threat to the nation's security. Since January 2025, the average applied U.S. tariff rate has surged from approximately 2.5% to an estimated 17.9% as of September 2025. The strategy consists of several overlapping phases:

• Reciprocal Tariffs under Executive Order 14257: A universal 10% baseline tariff on most imports and higher country-specific reciprocal tariffs (11% to 50%) for 57 countries with which the U.S. runs significant trade surpluses.
• Sectoral Tariffs under Section 232: Increased tariffs on steel and aluminium (50%), and new tariffs on automobiles and auto parts (25%) and semi-finished copper products (50%).
• Other Punitive Tariffs: The administration has imposed separate tariffs on Canada (35%), Mexico (25%), and China (20%) for reasons related to illegal immigration and drug trafficking.
• Suspension of De Minimis Exemption: The rule allowing packages valued below $800 to enter the U.S. duty-free was suspended, subjecting a vast new volume of small shipments to full duties.

The administration's approach is seen to be a "shock and negotiate" strategy. The layering of multiple legal authorities (IEEPA for broad "reciprocal" tariffs and Section 232 for targeted sectoral levies, alongside other punitive measures) creates a complex and intentionally unpredictable environment. This complexity is not a byproduct but a central feature of the strategy, designed to create maximum leverage over trading partners. By overwhelming them with a multi-front trade dilemma, the administration forces them into bilateral negotiations from a position of weakness. The success of this approach is evidenced by the preliminary agreements reached between April and August 2025 with seven major partners, including the European Union, the United Kingdom, Japan, South Korea, and Vietnam, all of whom aimed to negotiate down from the initially threatened tariff rates. This reveals that the ultimate goal is not merely protectionism but a fundamental rewriting of global trade relationships on a bilateral, transactional basis, marking a clear departure from the multilateral, rules-based system embodied by the World Trade Organization (WTO).

New Tariffs on Africa and AGOA’s Expiration

For African economies, the 2025 U.S. trade policy has been a devastating combination of two shocks: the new reciprocal tariff regime and the simultaneous expiration of the African Growth and Opportunity Act (AGOA).

The Expiration of AGOA

The African Growth and Opportunity Act, enacted in 2000, served as the cornerstone of U.S. economic policy toward sub-Saharan Africa for a quarter of a century. As a non-reciprocal trade preference program, it granted duty-free access to the U.S. market for over 6,800 products from eligible countries, with the explicit goals of fostering economic growth, promoting export diversification, and encouraging market-based reforms. The program officially expired on September 30, 2025, after the U.S. Congress failed to pass reauthorisation legislation.

Despite early bipartisan support for a long-term extension, evidenced by the introduction of the AGOA Renewal and Improvement Act of 2024, which proposed extending the program to 2041, the bill stalled amidst Washington's political gridlock and the administration's clear philosophical shift away from non-reciprocal preferences toward a transactional, reciprocal trade model. While some African leaders and U.S. lawmakers hold out hope for a short-term, retroactive extension before the end of the year, the uncertainty is profound. For businesses engaged in U.S.-Africa trade, the program is effectively defunct.

Tariff Hikes

The expiration of AGOA does not merely revert U.S.-Africa trade to the status quo ante of the late 1990s. Instead, it interacts with the new 2025 tariff framework to create what UNCTAD analysts have termed a "compounded impact" or a "second wave" of tariff increases.

First, with the lapse of AGOA, African goods that previously entered the U.S. duty-free now face the default Most-Favored-Nation (MFN) tariff rates applied to all WTO members. Second, the new reciprocal tariffs are applied on top of these MFN rates. This stacking of duties results in a sudden escalation of the total effective tariff burden. For example, analysis from UNCTAD projects that the trade-weighted average U.S. tariff faced by Kenyan exporters could nearly triple, jumping from the current 10% reciprocal rate to a staggering 28%. For certain highly protected product categories, such as apparel, the cumulative tariffs could reach as high as 48%, effectively closing off the U.S. market entirely for many African producers.

Country-Level Impact Analysis

The impact is uneven across Africa. Of the 57 countries subjected to higher country-specific tariffs, 20 are in Africa, while 29 other African nations face the 10% baseline rate.

• Most Affected: The tariff regime disproportionately targets Southern African nations, which face some of the highest rates on the continent. Lesotho (50%), Madagascar (47%), Mauritius (40%), Botswana (37%), and South Africa (30%) are among the most severely impacted. For economies like Lesotho, where exports to the U.S. accounted for 18.7% of its total exports in 2023, a 50% tariff is an existential economic threat.
• Moderately Affected: The nations of East Africa were largely spared the higher country-specific rates and are subject only to the 10% baseline tariff. This group includes several of the continent's most dynamic and diversified economies, such as Kenya, Ethiopia, and Tanzania, as well as North African powerhouse Egypt. While a 10% tariff is a significant new barrier, it is less catastrophic than the rates imposed on their southern counterparts.
• Exemptions: A small number of African countries (Burkina Faso, Seychelles, and Somalia) were not named in the executive orders and thus face no new tariffs. This is presumably because each of these nations maintains a trade deficit with the United States, placing them outside the logic of the reciprocal tariff framework.

This dual shock effectively dismantles 25 years of U.S. policy designed to foster African industrialisation. The new tariffs impose the highest duties on the light-manufacturing sectors that AGOA nurtured (e.g., apparel) while exempting many raw commodities (e.g., oil, critical minerals). This actively incentivises a reversion to commodity dependence, undermines long-standing development objectives, and creates a strategic vacuum that geopolitical competitors like China are positioned to fill.

Sector Analysis

The new tariff regime has created a distinct set of winners and losers across the African economy, threatening export-oriented manufacturing while partially insulating commodity-based sectors.

Apparel and Textiles

The apparel and textile sector stands as the most acute and immediate casualty of the U.S. policy shift. For countries like Kenya, Lesotho, Eswatini, and Madagascar, which leveraged AGOA's duty-free access to build substantial, export-focused garment industries, the new tariff environment represents substantial risk. These industries are highly concentrated, with the U.S. market often accounting for the vast majority of their exports, making them exceptionally vulnerable to any loss of preferential access.

For example, under AGOA, Kenya's textile and apparel exports to the United States grew tenfold, from approximately $50 million in the early 2000s to around $500 million in 2025. This growth allowed Kenyan manufacturers to compete effectively with established Asian exporters. With the compounded effect of MFN tariffs and the new 10% reciprocal tariff, that competitiveness has vanished overnight. As sector leaders have noted, they face substantial headwinds when competing with rivals in Bangladesh and Vietnam, even though those countries also face new U.S. tariffs. The reason is structural as African apparel manufacturers often have higher domestic operating costs (including for energy and logistics) and are dependent on importing raw materials like fabric, which adds another layer of cost that their more vertically integrated Asian competitors do not face.

The human cost of this industrial disruption is already becoming apparent. Across the continent, an estimated 1.3 million direct and indirect jobs are tied to AGOA-dependent industries, and these livelihoods are now at immediate risk. In Kenya alone, the sector employs over 66,000 workers, many of them women, in its garment districts. In the weeks following AGOA's expiration, at least one major Nairobi-based apparel manufacturer, United Aryan, announced it would shed 1,000 jobs, citing the trade uncertainty. The situation is even more dire in smaller, more dependent economies. In Lesotho, the apparel sector is the largest formal employer, providing jobs for 30,000 to 40,000 workers, predominantly women. The imposition of a 50% reciprocal tariff on top of MFN rates threatens the viability of this entire industry.

Agriculture and Food Products

After apparel, the agriculture and food products sector is projected to face the most significant tariff increases. AGOA had created valuable niche market opportunities for a range of African agricultural exports, including counter-seasonal fruits and vegetables, processed foods, fish, and nuts. These products will now be subject to both MFN duties and the new reciprocal tariffs, eroding their price competitiveness in the U.S. market.

The South African government has been particularly vocal about the threat to its agricultural sector, a key source of employment and foreign exchange. It has identified strategic exports such as citrus as being severely impacted by the 30% reciprocal tariff, which threatens to disrupt established value chains that have been built over many years. In response, South Africa is actively pursuing market diversification as a primary mitigation strategy, seeking to redirect agricultural exports to markets in Asia, the Middle East, and within the African continent itself.

Minerals, Energy, and Natural Resources

In contrast to the manufacturing and agricultural sectors, Africa's vast mineral and energy industries are partially insulated from the most severe impacts of the new tariffs. This is not due to any preferential treatment for Africa, but rather to strategic self-interest on the part of the United States. Annex II of Executive Order 14257 contains a list of over 1,000 product categories that are explicitly exempt from the reciprocal tariffs. This list is dominated by raw materials deemed critical for the U.S. economy and its industrial base.

Key exemptions include petroleum and other energy products, critical minerals such as cobalt, manganese, and graphite, precious metals like gold and platinum, and various rare earth elements. These commodities comprise the bulk of exports for many of Africa's largest economies. This provides significant relief for major commodity exporters such as Nigeria and Angola (crude oil), the Democratic Republic of Congo (cobalt), and Zambia (copper). Their primary exports can continue to enter the U.S. market subject only to low or zero MFN tariffs.

However, this insulation is neither absolute nor universally beneficial. First, it reinforces Africa's role as a supplier of raw materials, discouraging the development of downstream processing and value addition (beneficiation), as any processed or semi-finished mineral products not explicitly listed in Annex II would be subject to the full weight of the tariffs. Second, the exemptions do not apply evenly. South Africa, a major producer of platinum group metals and a significant exporter of finished automobiles, was hit with a high 30% reciprocal tariff. While its raw mineral exports may be exempt, its manufactured goods, including vehicles, face a prohibitive new barrier.

Learning Resources v. Trump

The legal centrepiece is the consolidated Supreme Court case of Learning Resources, Inc. v. Trump, with arguments scheduled for November 5, 2025. The core question is whether the International Emergency Economic Powers Act (IEEPA) can be interpreted to grant the President the power to unilaterally impose tariffs. Challengers argue this violates the Constitution's Commerce Clause, which grants Congress exclusive authority to set tariffs.

The Supreme Court's decision is the most critical variable for the trade policy outlook.

• Scenario A: Status Quo / Legal Limbo (Moderate Probability): The Supreme Court avoids a definitive ruling, leaving the IEEPA tariffs in place under a cloud of legal uncertainty. The administration would likely continue to use the threat of further action to maintain negotiating pressure.
• Scenario B: Executive Authority Upheld (Moderate-to-High Probability): The Court rules in favour of the administration, solidifying the legal foundation of the tariffs. The administration would likely escalate its protectionist agenda, potentially increasing the baseline reciprocal rate and concluding ongoing Section 232 investigations with new sectoral tariffs.
• Scenario C: Executive Authority Curtailed (Low-to-Moderate Probability): The Court affirms the lower court rulings, invalidating the reciprocal tariff framework. This would trigger a chaotic but massive unwinding of the largest portion of the 2025 tariffs, providing significant relief for most imports. Section 232 tariffs on steel, autos, etc. would remain in place.

Outlook

There is a strong consensus among major international financial institutions that the U.S. tariffs and the resulting global trade tensions will act as a significant drag on economic growth. The World Trade Organization (WTO) has warned that under the current tariff scenario, global merchandise trade could contract in 2025, a sharp reversal from previous growth forecasts. The International Monetary Fund (IMF), the World Bank, and the Organisation for Economic Co-operation and Development (OECD) have all downgraded their global GDP growth projections, consistently citing escalating trade barriers and heightened policy uncertainty as primary headwinds.

For the United States, the consensus forecast is for slower GDP growth and higher inflation. Analysis estimates that the full suite of 2025 tariffs will impose a direct cost of $3,800 on the average U.S. household through higher prices and will reduce the long-run size of the U.S. economy by 0.6%.

For emerging markets and developing economies (EMDEs), the outlook is particularly challenging. While many experienced a temporary boost in exports to the U.S. in the first half of 2025 due to "front-loading" (importers accelerating orders to get ahead of tariff implementation), this effect is expected to unwind in the coming quarters. As corporate inventories are drawn down and the higher effective tariff rates begin to set in, trade flows from EMDEs to the U.S. are projected to soften significantly, weighing on their growth prospects.

The U.S. trade policy pivot of 2025 represents a significant disruption to the global trade order, effectively ending the era of predictable, rules-based trade. For African nations and other developing economies, this shift has created a severe crisis, threatening economic diversification and millions of jobs. The immediate future is shrouded in legal and political uncertainty, hinging on the Supreme Court's decision in Learning Resources v. Trump. In this volatile environment, the strategic imperatives are clear: businesses must embed resilience and diversification into their core operations, while developing nations must strengthen domestic economies, deepen regional integration, and pursue a more diversified set of global partnerships. Adaptation is not optional but essential for survival and future prosperity in this new climate of global trade.