Trump’s tariffs have gutted Agoa’s duty-free promise

THE African Growth and Opportunity Act (Agoa) was introduced in 2000 as the cornerstone of US development-oriented trade policy towards sub-Saharan Africa.

- TIM VOGEL AND ZORYANA OLEKSEYUK

It was designed to grant eligible countries duty-free access to the US market.In February, President Donald Trump signed a one-year extension after the programme lapsed in September. Yet the programme's core benefit has already been effectively eliminated.

Since April, the US has imposed additional bilateral “reciprocal” tariffs ranging lately from 10% to 30% on countries eligible for the Agoa terms. Critically, Agoa only waives the standard tariff rate the US applies to all World Trade Organisation members (called the Most Favoured Nation tariff). This averaged just 3.3% in 2017.

The US Supreme Court struck down the much larger reciprocal surcharges on February 20. But the White House responded immediately, imposing a 15% surcharge on most imports, effective February 24 for 150 days. Agoa technically lives on after a one-year extension. But its main advantage has largely disappeared since the US added tariffs on top of it.

As economists and trade modellers at the German Institute of Development and Sustainability, we are interested in quantifying the effects of the changing US tariff regime. We ran a model that captures economy-wide adjustments across sectors and countries after a tariff shock via prices, production, consumption and trade diversion.

Our simulations show that new Trump-era tariffs drive large declines in US-bound exports from Africa. The steepest damage is in a few Agoa-dependent countries and sectors such as apparel. Our results remain valid after the latest shift to the 15% tariff surcharge.

African exporters face substantial duties. Agoa offers only a modest advantage over other developing countries still subject to Most Favoured Nation status tariffs.

Thus, the promise of duty-free access has been hollowed out.