Killing AGOA Softly? The Impact of Trump’s Tariffs for Sub-Saharan Africa

List of Key Chapter Titles

1. Summary
2. Introduction
3. Modelling approach and scenarios
4. Aggregate results
5. Country-level effects for SSA
6. Tracing sectoral effects
7. Conclusions and policy implications
8. References

Document Introduction

With Trump's return to the White House, U.S. trade and development policy has undergone a decisive shift, marked by significant cuts to USAID, shifting alliances, escalating trade tensions, and a broader retreat from multilateralism. The expiration of the U.S. Generalized System of Preferences (GSP) in 2020 and the scheduled termination of the African Growth and Opportunity Act (AGOA) in September 2025 have already raised concerns in Sub-Saharan African (SSA) countries. Driven by the "America First" agenda, the introduction of new tariffs has effectively brought AGOA to an early end. This policy brief aims to assess the potential impact of transitioning from the duty-free treatment under the U.S. GSP and AGOA to the new tariff regime of the Trump era, which includes a universal 10% tariff applicable to all trading partners, and the "reciprocal" tariffs announced on the so-called "Liberation Day" for 57 countries.

The study employs a multi-regional Computable General Equilibrium (CGE) model for simulation analysis, setting up two scenarios: first, a universal tariff scenario assuming all trading partners face an additional 10% ad valorem tariff; second, a "reciprocal" tariff scenario, based on the weighted average of the 2017 Most Favored Nation (MFN) rates, imposing additional tariffs (up to 50%) on specific affected countries and regions, while imposing an additional 10% tariff on unlisted countries. Both scenarios signify the end of AGOA and GSP preferences and a shift in the global tariff structure towards the new tax system of the Trump era.

Simulation results show that while the overall impact on all AGOA beneficiary countries is limited (overall exports decline by up to 1.1%, with real GDP largely unchanged), significant adverse effects are observed for specific SSA economies, such as Lesotho (within the rest of the Southern African Customs Union), Madagascar, Chad, Botswana, Nigeria, South Africa, Mauritius, and Malawi. The most affected sectors include apparel, leather products, and other manufacturing. From a global perspective, the United States and China would bear the greatest losses under the new tariff regime, with U.S. trade expected to decline by 12-15%, and Chinese exports to the U.S. potentially plummeting by 60-83%.

At the country level, impacts vary depending on the magnitude of tariff changes and export structures. Under the "reciprocal" tariff scenario, exports to the U.S. from South Africa, Madagascar, Botswana, and the Central African region of South Africa (composed of Angola and São Tomé and Príncipe) suffer severe blows, with declines ranging from 44% to 68%. Regions highly dependent on the U.S. market, such as the rest of the Southern African Customs Union (primarily Lesotho), experience a total export decline of up to 5.9% and a real GDP drop of 0.3%. However, some AGOA countries (e.g., Ethiopia, Burkina Faso) may see increased exports to the U.S. due to trade diversion effects.

The report notes that the described results represent the lower bound of the potential impact of U.S. protectionist policies. The GTAP model used, along with most existing trade macroeconomic models, fails to fully capture all the damage caused by the new tariffs of the Trump era, including indirect effects such as reduced foreign direct investment due to persistent uncertainty, weakened supply chain integration, increased poverty levels, and the loss of capacity-building support under the AGOA framework. Furthermore, the simulations do not account for any potential retaliatory measures, meaning that an intensified global trade war and economic recession could further harm African economies.

Given that current U.S. trade policy has effectively terminated AGOA by introducing new tariffs, rendering its future highly uncertain, the report emphasizes that it is crucial for SSA countries to continue building a more resilient and diversified trade structure. This includes deepening regional integration through the African Continental Free Trade Area (AfCFTA) and promoting value chain upgrading. Simultaneously, the European Union should seize the opportunity to reaffirm its role as a reliable and development-friendly trade partner by defending WTO rules, renewing its GSP before 2027, avoiding retaliatory tariffs that harm vulnerable countries, and deepening strategic partnerships with the Global South (e.g., through Clean Trade and Investment Partnerships or Sustainable Investment Facilitation Agreements).