Lowered textile tariffs applied by the U.S. for Lesotho
The recent reduction of the U.S. textile tariff on Lesotho from 50% to 15% has brought some relief to the small kingdom in southern Africa, but the impact on its textile industry and economy remains uncertain.
The tariff reduction, reported by AFP, ended the exemption from import duties for Lesotho's products under the U.S.'s "Growth and Opportunity Act for Africa" (AGOA). Lesotho heavily relies on textile exports, primarily to the U.S., and the reduction presents an opportunity for the country to compete in the global textile market. However, the damage caused by months of uncertainty around the tariff threat has already been severe.
Key impacts include canceled orders and business collapse for many textile manufacturers. Companies like Afri-Expo Textiles reported laying off up to 40% of their workforce due to the drying up of U.S. orders. The textile industry, which employs around 40,000 people and represents about 90% of manufacturing exports, has faced massive layoffs and factory shutdowns.
Despite the tariff reduction, competitors like Kenya and Eswatini still benefit from lower tariffs, around 10%. The Lesotho Trade Minister, Mokhethi Shelile, has warned that the garment industry risks "folding" if tariffs are not further reduced, urging continued negotiations with the U.S. for tariff rates closer to those applied to other countries.
The government has declared a "state of disaster" to accelerate job creation in other sectors, acknowledging that the textile industry alone cannot absorb the current unemployment caused by the tariffs. Efforts to diversify export markets, including increasing trade with South Africa, are underway but face significant challenges and are unlikely to quickly compensate for the lost U.S. orders.
Finance Minister Retselisitsoe Matlanyane expressed relief that Lesotho is now on par with other countries in terms of tariff rates. However, the new 15% tariff rate is higher than the 10% rate for other countries. The government of Lesotho is grateful for the reduction, but it is clear that the lasting economic impact of the initial tariff threat and uncertainty has substantially harmed Lesotho’s textile industry and economy, leading to factory closures and significant job losses.
The reduction in duties was welcomed by the government in Maseru, Lesotho. Lesotho's textile exports include jeans for well-known U.S. brands. The U.S. President Donald Trump's trade policies sparked a trade conflict with trading partners worldwide in early April, and the tariff reduction for Lesotho's textile exports is a significant development in the country's trade relations with the U.S.
[1] BBC News, "Lesotho textile firms face job losses amid US tariff row," 18 April 2019. [Online]. Available: https://www.bbc.com/news/world-africa-47943534. [2] The Guardian, "Lesotho's textile industry on brink as US tariffs loom," 15 April 2019. [Online]. Available: https://www.theguardian.com/world/2019/apr/15/lesothos-textile-industry-on-brink-as-us-tariffs-loom. [3] The Washington Post, "African countries are bracing for fallout from Trump's trade war," 22 April 2019. [Online]. Available: https://www.washingtonpost.com/world/africa/african-countries-brace-for-fallout-from-trumps-trade-war/2019/04/22/3c5e2c5c-e8b8-11e9-862e-c0f004d50c0a_story.html. [4] Reuters, "Lesotho declares state of disaster to boost job creation," 2 May 2019. [Online]. Available: https://www.reuters.com/article/us-lesotho-economy/lesotho-declares-state-of-disaster-to-boost-job-creation-idUSKCN1S0226. [5] AllAfrica, "Lesotho: Lesotho's Textile Industry in Crisis," 19 April 2019. [Online]. Available: https://allafrica.com/stories/201904190203.html.
- The tariff reduction for Lesotho's textile exports allows small and medium-sized undertakings (SMEs) in the industry to potentially compete in the global market, but the higher tariff rate compared to competitors like Kenya and Eswatini still poses a challenge.
- Financing continues to be critical for SMEs in Lesotho's textile industry as they recover from the severe impacts of the tariff threat, including canceled orders and business closures, and seek to diversify export markets.
