Kevin Lings, Stanlib Asset Management senior economist, talks to Observer Money about the impact of the 21% tariffs imposed on Namibia by US President, Donald Trump.
Observer Money (OM): What do you make of the US government’s recent reciprocal tariff imposed on African countries which includes 21% tariffs on Namibia?
Kevin Lings (KL): In general, the level of reciprocal tariffs introduced by the US are significantly higher than expected. It can be argued that the focus on the excessive tariff levels are focused on Asia, Cambodia, Vietnam, Indonesia, Thailand, although sub-Saharan Africa was also an area of focus including Angola, Botswana, Lesotho, Malawi, Mozambique, South Africa, Namibia, Zambia and Zimbabwe. The tariff levels imposed on all countries are well above the tariffs imposed by those countries on the US. For example, the average import tariff imposed by Namibia is 7.5%, which is well below the 42% claimed by the Trump administration as well as 21% the US will implement with effect from 9 April. While it could be argued that this provides some room for negotiation, the starting point of 21% is extremely high relative to the reality of 7.5% tariffs. In recent decades, many African countries have focused on increasing their exports to China and Asia more broadly rather than the US. This is despite the introduction of the AGOA agreement in 2000. For example, while the US is South Africa’s second largest trading partners after China, it presents around only 8% of SA’s total exports. The higher tariffs from the US will encourage these and other countries to intensify their focus on finding alternative export destinations, thereby further reducing their reliance on the US.
OM: Do you think that is the end of AGOA, the non-reciprocal agreement designed to support developing countries and least developed countries (LDCs) in Africa by leveraging preferential access to the US?
KL: Yes. It is difficult to imagine that AGOA continues given the reciprocal tariff announcement. We will have to see if any of the African countries enter into successful negotiations for the US. South Africa and other are planning to try and negotiate a better deal, but it is unclear how successful this will be and if this negotiation will be done on a country-by-country basis or some group discussion.
OM: How will the reciprocal tariff affect Namibia’s exports of beef, fish, diamonds, and uranium?
KL: There is a long list of items that have been excluded from the reciprocal tariffs. This would include uranium, but I did not see diamonds on the list. Beef and fish would attract the 21% import tariff. Each business would have to decide if they are willing to adsorb the tariff increase or try to pass that on to the customers. If they pass most of it on, does this result in a sharp decline in business given that most other countries are also dealing with tariff increases. Does the US now source these products internally? There are still a lot of unknowns, but it is likely that the higher tariffs result in a combination of outcomes including less goods being sold to the US, higher prices in the US and a slowdown in demand.
OM: Do you think this will lead to the restructuring of SACU tariffs?
KL: It is possible that the negotiations result in some of the SACU tariffs being lowered.
