Lesotho's economic lifeline threatened by Trump's tariffs
The imposition of a 50-percent customs tariff on Lesotho, the highest among all economies subjected to new tariffs by President Donald Trump, could lead to an economic catastrophe for this small kingdom in southern Africa, which Trump last month described as "a country no one has heard of."
Lesotho, one of the poorest countries in the world with a gross domestic product of just over two billion dollars, maintains a significant trade surplus with the United States. Exports to the USA, which reached 237 million dollars in 2024, account for over 10 percent of the country’s GDP. The main export goods are diamonds and textiles, including Levi's jeans.
On Wednesday, Donald Trump introduced sweeping new tariffs on global trading partners, undoing decades of free trade. The US president stated that "reciprocal" tariffs are a response to fees and other non-tariff barriers imposed on American goods. According to the US administration, Lesotho imposes 99-percent tariffs on American products.
The end of preferential trade with Africa
According to experts, Trump's move effectively means the end of the AGOA (African Growth and Opportunity Act) trade agreement, which was intended to help African economies develop through preferential access to US markets. This decision deepens the continent's problems following Trump's earlier dismantling of USAID, which was the main provider of aid to Africa.
The 50% reciprocal tariff introduced by the U.S. government is going to kill the textile and apparel sector in Lesotho, said Thabo Qhesi, an independent economic analyst from Maseru, in a conversation with Reuters.
According to Oxford Economics, the textile sector, employing about 40,000 workers, is the largest private employer in Lesotho and accounts for about 90 percent of industrial employment and exports.
Qhesi added, "Then you are having retailers who are selling food. And then you have residential property owners who are renting houses for the workers. So this means if the closure of factories were to happen, the industry is going to die and there will be multiplier effects."
Disproportionate effects for small economies
The government of Lesotho, a mountainous nation of about two million people surrounded by South Africa, did not immediately comment on the tariff information on Thursday. However, the country's foreign minister informed Reuters last month that Lesotho is already feeling the effects of aid cuts, because its health sector was dependent on it. It is worth noting that the country has one of the highest HIV/AIDS infection rates in the world.
The formula used to calculate the US tariffs applied the US trade deficit in goods with each country as an indicator of alleged unfair practices, and then divided it by the amount of goods imported into the United States from that country. The resulting tariff equals half the ratio between these two values, meaning that countries importing only small amounts of American goods, such as Lesotho and Madagascar, were hit by more severe tariffs than significantly wealthier countries.
The same situation applies to Vietnam, Nicaragua, and Cambodia, where exports to the United States account for over 25 percent of GDP, according to Oxford Economics. A corn seller in Maseru, Sekhoane Masokela, sees Trump’s announcement as a reason to seek new markets: "His (Trump's) is not the only country, so he is giving us an opportunity to cut ties with him and look for other countries. It is evident that he no longer wants anything to do with us."
