AGOA expiration and new US reciprocal tariffs; there is still an opportunity to bloom

AFRICA: ENACTED in May 2000 the African Growth and Opportunity Act (AGOA) is the cornerstone of US economic engagement with the countries of sub-Saharan Africa. The agreement provides duty-free access to the U.S. market for eligible Less Developed Countries (LDCs). In June 2015, the US government authorised AGOA for an additional 10 years. Tanzania was …

AFRICA: ENACTED in May 2000 the African Growth and Opportunity Act (AGOA) is the cornerstone of US economic engagement with the countries of sub-Saharan Africa.

The agreement provides duty-free access to the U.S. market for eligible Less Developed Countries (LDCs). In June 2015, the US government authorised AGOA for an additional 10 years.

Tanzania was among the AGOA scheme’s beneficiaries, where they export selective commodities duty-free to the US market. Tanzania became eligible for the AGOA scheme since year 2000 with the periodic review, and the current authorisation comes to expire in September 2025.

Statistics show the growth of Tanzania’s exports to the US market, where there was a constant rise from 2007 to the present, where more than 90 per cent were textile and apparel. This has become very important in the textile and apparel sector of Tanzania by creating jobs and attracting Foreign Direct Investments.

Under the second term of President Trump’s administration in the USA, they announced new reciprocal tariffs for their trading partners on 2nd April 2025, as one of the ways to curb the trade imbalance faced by the US.

The tariff policy introduced a 10 per cent baseline tariff on all imports and country-specific tariffs from 20 per cent to 54 per cent depending on the level of trade imbalance.

With the ongoing silence on the renewal of the AGOA scheme and with less than six months to its expiration, the fate of AGOA is uncertain. Therefore, exporters under the AGOA scheme have to adjust to the new tariffs announced to access the US market.

Since the new tariff of 10 per cent may change how Tanzania trades with the US, the rate remains significantly lower than the tariffs imposed on other manufacturing countries like Vietnam (46%), China (34%), and India (26%).

There is ongoing tension on global trade, and we expect the disruption of the global value chain and trade flow. With this uncertainty, countries are now strategising on how they can mitigate the risk that comes with the trade and production shocks.

The USA is one of the biggest and lucrative markets globally, trading with them has the potential to benefit trading partners and therefore, countries are looking to expand/continue trading with the USA as a potential trade partner.

Trade value between Tanzania and the USA is very minor when you compare it with other Tanzania markets such as the EU, UK, EAC, SADC and China. Regardless of that fact, the country cannot ignore the opportunities that may come with the market disruption from the introduced tariffs. Tanzania can take the following steps to seize the opportunities arising from the ongoing trade war;

(i) Attracting Foreign Direct Investments from the heavily affected countries

Firms from heavily impacted countries such as China, the EU, Canada, Brazil and others may consider relocating their investments to nations with lower tariffs to access the US market more competitively.

To attract these companies to come and invest in Tanzania, the government has to ensure that the investment environment attracts foreign investors and offsets the logistical costs from Tanzania to the USA. This includes the legal and regulatory environment, supportive infrastructures and skills availability.

(ii) Export financing for domestic exporters

Another option is to finance Tanzanian exporters to invest in upgrading the sanitary and phytosanitary standards and other certifications required for their products so that they can penetrate the US market. With the competitive advantage acquired in terms of lower tariffs compared to other countries, Tanzania’s exporters need to upgrade their capacity in terms of technology and skills so that the products can meet the required standards.

(iii) Leveraging Digital logistics transformation

One of the reasons for the lower trade between Tanzania and the US is logistical challenges because of the vast distance between the two countries. With the evolution of Artificial Intelligence (AI), it can be utilised for route optimisation, supply chain tracking and in facilitating customs clearance and hence reduce the logistic costs and time for consignment shipping to the US.

• Strengthening value added exportation

Tanzania has the opportunity to diversify its exports to the US market from the traditional raw materials to value-added exports such as apparel, processed foods, leather goods and specialty agriculture. Since most of these products were sourced from outside the US and the main suppliers are facing a higher US reciprocal tariff than Tanzania, the country can leverage this opportunity to boost the manufacturing sector.

• Engaging Tanzania’s private sector

The private sectors are the key stakeholders in international trade. While the government regulates and facilitates, the private sectors are the one investing and exporting products. With this, the government and private sectors must have dialogues and strategise on how Tanzania can seize the potential that comes with the ongoing trade war between the giant economies. This will build capacity in the private sector, including Small and Medium Enterprises, to explore the US market.

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Therefore, with the ongoing trade war between the US and its trading partners, although we expect a decline in global trade and GDP, it is not all doom and gloom for Tanzania; there is still an opportunity for bloom if strategised well.