The German Institute of Development and Sustainability says Malawi will be among the worst hit economies in sub- Saharan Africa due to the US universal 10 percent tariff imposed on all its trading partners and reciprocal tariffs announced for 57 countries.
In its analysis on the Impact of Trump’s Tariffs for sub-Saharan Africa (SSA), the think-tank said in case of universal 10 percent tariffs, the highest average US tariffs of around nine percent occur in Chad, Malawi, Mozambique and Nigeria.
At negative 1.1 percent, Malawi is also expected to register the highest decrease of total exports after Southern African Customs Union at -1.6 percent and Chad at -1.3 percent.
For leather products, Malawi’s exports are projected to drop by between 10 and 13 percent alongside Côte d’Ivoire, Benin, Burkina Faso, Tanzania, Niger, Mali and South-Central Africa while for manufactures, the drop in Malawi is projected at between three to four percent.
For sugar cane and beet, the anticipated reduction of total exports is by 2.73 percent in case of universal tariffs and by 4.24 percent in the “reciprocal” scenario.
Reads the analysis in part: “The expiration of the Generalised System of Preferences in 2020 and the scheduled end of African Growth and Opportunity Act [Agoa] in 2025 had already raised concerns among sub- Saharan African countries.”
The institute said the quantified effects are conditional on a number of assumptions, such as no change in employment or real investment, which do not reflect the harsh reality.
On the other hand, the model does not account for indirect effects, such as lower foreign direct investment due to sustained uncertainty, weakened supply chain integration, increased poverty levels, and loss of capacity-building support previously available under the Agoa umbrella.
Reads the report: “Moreover, our simulations do not account for any potential retaliatory measures, so an intensified global trade war and economic downturn might further harm African economies.
“The consequences could be also more severe for SSA countries due to their limited fiscal space and potential implications for debt repayment and financial stability.”
Agoa beneficiaries have since 2000 benefitted from a duty-free access to the US market.
While Malawi was slapped with a 17 percent tariff, an analysis by the Centre for Global Development, a Washington DC-based think tank, estimates that potential effects of Trump’s tariffs on Malawi could be significant looking at the size of the US export market relative to total imports of tobacco, tea and sugar, which have tariff rate of 27 percent.
Published Agoa data show that as at 2022, of the $16.2 million (about K28 billion) generated from tobacco exports to the US, 95 percent of it was under Agoa and the rest under duty-free normal tariff relations.
Similarly, tea, which generated $13.1 million (about K23 billion), was mostly exported duty-free, the same with sugar, which generated $10.4 million (about K18.2 billion).
In a brief interview, Minister of Trade and Industry Vitumbiko Mumba said government “will comment at an appropriate time”.
National Working Group on Trade and Policy chairperson Frederick Changaya has since urged Malawi to reduce her dependency on preferential trade agreements, and “start working on attracting investors in value addition”.
The Agoa, which expires in September this year, grants duty-free access to more than 1 800 products from eligible SSA countries and has formed the backbone of US-Africa trade policy for 25 years. It was renewed for 10 years in 2015.
Since Agoa’s inception in 2000, Malawi has exported goods worth $1.55 billion (about K2.5 trillion) to the US market over the past 23 years
