There are mixed reactions to reciprocal tariffs United States President Donald Trump has unveiled with some saying it could depress the market for Malawian exporters by increasing costs amid uncertainty over the African Growth and Opportunity Act (Agoa).
The new tariffs have raised concerns over the status of Agoa for 32 low-income African countries, including Malawi set to expire in September this year.
The countries have since 2000 benefitted from a duty-free access to the US markets.
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 shows 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 under 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 an interview on Tuesday, Tea Association of Malawi chairperson Sangwani Hara observed that Malawi competes with other African countries such as Kenya, Uganda, Tanzania and Rwanda for direct exports of tea to the US market, but the US tariff rates for these countries are pegged at10 percent.
He said: “This puts Malawi at a great disadvantage. Similarly, we compete with Kenya on macadamia exports to the US. Again this puts us at a disadvantage.
“We hope to see our Ministry of Trade urgently doing something on like other countries have already started doing. We would like to see some alignment of tariffs with the US so that we are not disadvantaged.”
On his part, Illovo Sugar (Malawi) plc board chairperson Jimmy Lipunga said on Tuesday that while tariffs can increase the cost of imports making them uncompetitive as consumers consider other substitutes, if the US still requires Malawi sugar, there may not be much impact on volumes of imports
“I hope that, like other countries are doing, we can engage the US to negotiate for reduction of tariffs and stimulation of trade,” he said.
A tobacco industry analyst observed that growers may not be able to make more money from tobacco farming as buying companies would be transferring the costs to farmers and increased prices of cigarettes and other tobacco products.
National Working Group on Trade and Policy chairperson Frederick Changaya said in an interview on Tuesday that Malawi should reduce her dependency on preferential trade agreements, but work on attracting investors in value addition.
US Treasury Secretary Scott Bessent said on Sunday that more than 50 nations had started negotiations with the US since Trump announced the tariffs last Wednesday.
Minister of Trade and Industry Vitumbiko Mumba indicated in an interview on Wednesday that “we will comment at an appropriate time”.
The Agoa, which expires in September, grants duty-free access to more than 1 800 products from eligible sub-Saharan African 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, with $1.15 billion (about K1.96 trillion) qualifying for Agoa preferences, ranking 15 out of 35 countries in Africa that have most utilised the trade window over the past 23 years.
Malawi’s exports to the US comprise mostly agricultural products such as tobacco, sugar, tea and nuts.
Last year, Malawi joined other African countries to push for an early 10-year extension of the Agoa trade window beyond 2025.
The Centre for Global estimates that Agoa costs the US about $250 million (about K438 billion) a year in foregone tariffs or about two percent of US aid to Africa before the recent cuts.
US tariffs are taxes imposed on imported goods known as ‘duties’, which are levied by US Customs and Border Protection to regulate trade, protect domestic industries and raise revenue.
The harmonised tariff schedule of the US outlines the tariff rates and statistical categories for all merchandise imported into the country.
