Greetings, the latest 50% tariffs slapped on Lesotho by the US almost sounded the death knell for the manufacturing industry here, and with Trump’s flip-flopping and making serious policy and economic announcements on social media, on the day they were to kick in, he dials back and gives a 90 day reprieve on implementation of the reciprocal tarrifs while pushing those on China to 135%. This constant changing in mind and uncertainty has caused global markets into flux.
The global economic landscape has been significantly shaped by recent U.S. trade policies, particularly under the Trump administration. It seems like Trump escalates to de-escelate. He calls it the ” The art of the deal”, the markets and most rational economists think it is reckless and dangerous. Markets need certainty, either way.
Two concepts, Tariffonomics and Trumplflation, have emerged to describe the ripple effects of these policies. Tariffonomics refers to the economic impact of tariff-driven trade wars, while Trumplflation denotes inflationary pressures stemming from such policies. In this article, I explore their implications for Africa, with a spotlight on Lesotho.
Understanding Tariffonomics and Trumplflation
– Tariffonomics: Characterised by aggressive tariffs on imports, notably the U.S.-China trade war initiated in 2018, this policy disrupted global supply chains, increased production costs, and reshaped trade alliances.
– Trumplflation: The inflationary effects of these tariffs, as higher import costs in the U.S. cascaded into global markets, exacerbating price volatility in commodities and manufactured goods.
Global and African Impacts
Globally, Tariffonomics redirected trade flows, with companies relocating production to avoid tariffs. For Africa, this presented mixed outcomes:
– Opportunities: Some countries saw potential as alternative manufacturing hubs under initiatives like the African Growth and Opportunity Act (AGOA), which grants duty-free access to the U.S. market.
– Challenges: Retaliatory tariffs and reduced demand for commodities due to slowed global growth hurt exporters. Trumplflation increased import costs for fuel, machinery, and consumer goods, straining economies reliant on foreign goods.
Lesotho’s Vulnerabilities and Resilience
Lesotho faces unique exposure:
- Textile Exports Under AGOA:
– Lesotho’s textile industry, accounting for ~90% of exports to the U.S., thrived under AGOA. Tariffonomics initially boosted competitiveness as Chinese goods faced higher U.S. tariffs.
– However, uncertainty over AGOA’s renewal under Trump’s preference for bilateral deals risked destabilising investor confidence.
- Agricultural and Remittance Pressures:
– Wool and mohair exports, though smaller, faced volatility from fluctuating global demand.
– Remittances from Basotho miners in South Africa, contributing 20% of GDP, were threatened by South Africa’s economic slowdown linked to global trade tensions.
- Inflationary Spillovers:
– Trumplflation raised prices for imported essentials (e.g., fuel, food), worsening living costs in a nation where 50% live below the poverty line.
– The rand’s depreciation (pegged to Lesotho’s Loti) amplified import costs, straining household budgets.
- Regional Trade Dynamics:
– As a SACU member, Lesotho faced indirect impacts from U.S.-SACU trade relations, though AGOA insulated its textiles. Regional instability and reduced South African demand further compounded stresses.
Lesotho’s economy highlights the duality of Tariffonomics and Trumplflation: tariff shifts offered temporary export advantages, while inflation and policy uncertainty exposed fragility. Moving forward, diversification (e.g., agro-processing, tech) and strengthening regional trade partnerships are critical.
For Africa, the lesson is clear: reliance on single markets or sectors is risky. Policymakers must advocate for multilateralism and invest in resilient, diversified economies to navigate an era of geopolitical trade volatility. Lesotho’s story underscores the need to leverage preferential agreements like AGOA while preparing for a less predictable global order.
This analysis underscores the interconnectedness of global trade policies and local economies, urging proactive adaptation to safeguard Africa’s developmental gains. Lesotho and other countries need to look at its economy and how it trades with other countries different. First it was the USAID fund withdrawal, then exiting the WTO, WHO and all environmental treaties, then, tarrifs threats and employment and future sustainability in question. This new administration is redefining economic politics and Lesotho needs to look at diversifying it’s markets. Let’s hope it’s a wakeup call for all nations. Trump 2.0 is going to be a rocky ride.
KHOTSO. PULA. NALA.
BY: ABUBACAR JABBIE