Issue No. 76

Collateral Damage in Trump's Tariff War

The death of globalisation appears to be on hold-- for now. In an abrupt volte-face yesterday, US President Donald Trump rowed back from some of the most extreme tariffs set to be imposed on dozens of countries, barring staggering rates of 125% for China. Republican criticism and a plunging bond market appear to have spooked the US president, who has insisted that the plan all along was to threaten tariffs before engaging in negotiations with countries with steep trade deficits. Still, a baseline 10% levy has been imposed on all imports to the US, and when the 90-day pause expires, we may be set for a return to the tumult of recent days and the threat of a global recession.

Calling it a "liberation day for the American people," Trump's sweeping tariffs had threatened to upend the US-underpinned global economic system, with serious reverberations for the Horn of Africa. Though Kenya, Ethiopia, and Somalia were not singled out by the Trump administration as others in Africa were, such as Botswana (37%), Madagascar (47%), and Angola (32%), the knock-on political and economic impacts remain immensely consequential. As displayed by the effects of the COVID-19 pandemic, these economies are highly vulnerable to external shocks and supply chain disruption, as well as lack the finances to shore up impacted industries. As the Horn navigates intersecting crises of mass displacement, armed conflict, and humanitarian emergencies, the dual shock of aid elimination and a potential global recession threatens to unsettle the region's precarious economic and political contexts further.

Since the end of World War II, the United States has wielded its immense economic and military might to build and sustain the 'liberal international order.' Institutionalised through the Bretton Woods system that established the World Bank and International Monetary Fund (IMF) in 1944 and underwritten by the US dollar, it was created when just four African countries were independent. Since then, the IMF and World Bank have sought to promote laissez-faire economics in the Global South's developing markets, with many criticising its heavy-handed, singular interventions in Africa, particularly in the 1990s. 

A parallel aid system established by the US closely aligned with Washington's foreign policy interests—from Cold War competition in the 20th century to post-9/11 counter-terrorism in the 21st. African governments allied with the US have enjoyed preferential development assistance, food security programmes, health interventions, and trade frameworks such as the African Growth and Opportunity Act (AGOA) since 2000. Passed by the Clinton administration, AGOA has come to define much of US-Africa trade, which established zero tariffs on a host of African goods for the American market. In turn, exports to the US increased from USD 28bn in 2000 to USD 40bn last year, though the majority of exports are still raw and extractive goods. USAID and other aid flows simultaneously entrenched the US presence in the Horn, underwriting functions and service delivery in states otherwise hollowed by conflict or corruption. Trade and aid, in this context, functioned as both soft power and system maintenance—anchoring African states in a US-led global order.

Yet, in just a couple of months, many of these instruments of US soft power have been ripped up by the Trump administration. Most notable has been the gutting of USAID, which provided billions of dollars to Ethiopia, Somalia, and Kenya in assistance, but other tools have been slashed, such as the Voice of America radio network. Now, with the imposition of baseline tariffs, the US's recent economic tools in Africa are being upended as well. By foisting a 10% levy on imports from Kenya and Ethiopia, the administration has effectively bypassed the AGOA's statutory expiration date of September 2025, stripping the agreement of meaning with immediate effect. Unlike a formal termination, which would allow for consultations for a replacement framework, the tariffs simply overlay AGOA's existing structure with trade barriers. There is no indication that the administration intends to establish alternative arrangements with African partners or that it recognises the long-term strategic costs of economic disengagement from the region. 

The tariffs' impact on the Horn, though varying, is set to be immediate and far-reaching. Ethiopia, suspended from AGOA in 2021 over human rights abuses during the Tigray war, had been lobbying for reinstatement. The new tariff regime likely renders those efforts obsolete. Coffee—Ethiopia's most important export—now faces added costs reaching US markets, compounding the economic shock of Washington's recent USD 1.2 billion aid suspension to the country. Kenya, once held up as an AGOA success story, faces threats to the long-term viability of its apparel sector. The industry, oriented toward American consumers, saw its exports grow from USD 55 million in 2001 to USD 737 million in 2024. Yet many Ethiopian and Kenyan businesses survive on razor-thin margins, and the impact of diminished exports is likely to trigger bankruptcies and costs passed down to domestic consumers.

Others, such as Somalia and Djibouti, will be exposed to significant secondary impacts if the US-China trade war persists. In Somalia, where nearly all consumer goods are imported, price inflation will gradually ripple through key sectors—from food and medicine to building materials—exacerbating food insecurity and placing additional pressure on an already fragile socio-economic context. For Djibouti, the consequences are perhaps more geopolitical than economic, with its finances centred around port services and hosting foreign military bases, including the only permanent US military base in Africa.

For years, the American presence on the continent has been increasingly rivalled by China's methodical expansion, offering a development model free from political conditions and human rights concerns. In the 21st century, and particularly through the Belt and Road Initiative, though it has since been reduced in part, China has established itself as a reliable partner, building railways, ports, and digital infrastructure. Already Africa's largest trading partner for over a decade, China has invested billions of USD in infrastructure projects throughout the region, from the Ethiopia-Djibouti railway to the expansion of Kenyan ports. 

Unlike the US approach under AGOA, which tied trade preferences to governance reforms, China's engagement has been defined by less overtly political relations. The sudden diminishing of US engagement in Africa, particularly by the savaging of USAID, will undoubtedly open a vacuum for Beijing and other US competitors to insert themselves further. Many African governments may prefer to look to wealthy Gulf patrons, Turkey, Beijing and other members of BRICS for trade and support, free from the unpredictability and moralising that has come to define US engagement. But it is improbable that any of these are likely or willing to fill the humanitarian gap left by USAID's departure.

The new tariffs accentuate this divergence. As barriers to American markets mount, further diversifying trade is likely to become a priority for African governments. Trump's targeting of Chinese goods, though future negotiations could reduce their scale, is likely to strengthen Beijing's position in Africa by pushing regional economies to pivot eastward for both trade and investment. The Chinese Ministry of Commerce, in its official response to the tariffs, signalled increased market access for African exports. While touting their ability to return manufacturing to the US, Trump's tariffs-- if implemented in full-- are actually likely to further accelerate the shift towards a multi-polar world. 

Trump's tariffs and aid cuts mark the collapse of reciprocity as a cornerstone of US-Africa relations. In its place, a more transactional model is emerging with little room for soft power or multilateralism. Though many are breathing a sigh of relief with the pause on the imposition of the massive threatened tariffs, the Horn and Africa as a whole cannot afford to sit back with the threat of a prolonged trade war between China and the US. While there are some pressure points that African countries could use on the US, such as its geostrategic interests in the continent's immense precious mineral resources, it remains at the mercy of broader knock-on inflationary pressures. 

Looking ahead, a pan-African approach towards trade is critically needed, particularly if the world is headed for a period of isolationist trading blocs. The current crisis should inject fresh political urgency into developing regional economic integration through the East African Community (EAC) trading bloc and continental integration by implementing the African Continental Free Trade Area (AfCFTA). Previously, the national economic organisation to develop such integration would likely have been the UN Economic Commission for Africa (UNECA), particularly influential under Carlos Lopes, but it has since faded in importance. Leadership by African countries with fundamentally sound economic systems should also be emphasised at this tumultuous moment. Whether the Horn can seize this moment of 'liberation' will depend on how effectively it turns economic necessity into strategic opportunity.

The Horn Edition Team