writes Kasper Vrolijk
Africa-Press – Botswana. US policy is upending global trade patterns. Regional trade can help Africa fill the gap and safeguard the continent against future shocks.
Donald Trump’s Trade War is nonsensical and devastating. But it’s helpful in uncovering a harsh truth: many African economies have seen limited structural transformation, and as a result, limited progress in livelihoods. The African Continental Free Trade Area can provide the supply and demand needed to absorb losses from the Trade Wars and structurally transform economies in the long run. But only if the crucial hindrance – infrastructure development and its financing – can be addressed.
Trump’s Trade War
The tariffs enacted by President Trump in April 2025 constituted a direct assault on African economies, if not a violation of established international trade law. It embodied an irrational, if not farcical, approach to trade conflicts and retaliations. As others have shown, a nonsensical formula was applied to claim that countries that pose no direct economic menace to the US economy, but actually supply it with labour and goods at a bargain, should face punishment.
Nevertheless, Trump’s Trade Wars, the first in 2018 and now again in 2025, have a benefit: They show the dependency of some lower-income countries on trade, and in particular the dependency on providing low-cost labour and resources to richer countries. For example, take Lesotho, a textbook low-income, agricultural, landlocked economy with a GDP of £1.7 billion. For perspective, this is compared with the US’s £22 trillion GDP. Close to half of Lesotho’s population remains hooked into informal cultivation and animal husbandry, and unsurprisingly, a similar proportion of its people live below the national poverty line.
In Lesotho, what initially offered redemption and hope for an upward spiral towards better living conditions has been the textile and garment sector. The largest formal employer in Lesotho, accounting for 90 per cent of all manufacturing, the sector offered workers wages of around £70 a month, just at the minimum wage. The US’s African Growth and Opportunity Act (AGOA), which was introduced in 2000 and is due for extension in September 2025, had eliminated tariffs on a select group of commodities and for a select group of lower-income economies from Africa. It raised Lesotho to one of the prominent textile producers to the US in Africa. Now, Lesotho is faced by a nonsensical 50 per cent tariff.
African trade as a panacea
The African Continental Free Trade Area (ACFTA), which was established in 2018, with 43 parties and 11 signatories, is the largest free trade area in both population and geographical size after the World Trade Organization. Integral to the agreement is a pledge to eliminate tariffs on almost all goods as well as services in a staggered manner over the coming years.
Previously, the Continental Free Trade agreement may have been downplayed in its importance, but the Trade Wars have shown how trade (or the absence of it) affects the livelihoods of people across the continent. The African Continental Trade agreement could potentially provide the trade demand currently coming from the US, and in the long run, provide a more stable driver of growth and development.
While dependent on multiple factors, economic models anticipate the ACFTA to increase total exports by the continent by 29 percent by 2035, according to the World Bank. While not immediately comparable, for reference, 19 percent of Lesotho’s exports are currently directed towards the US. It could also be argued that the agreement provides a ‘better’ export demand; the World Bank envisions export growth, particularly in chemical, rubber, and plastic products, processed food products, and health and education services, which arguably generate higher value for Lesotho. As a result, the ACFTA could lift 30 million people out of poverty, and enhance incomes for another 68 million who live on less than £4 a day,
The free trade agreement has developed swiftly, but still requires a stronger push from international institutions and policymakers. The announcement of the Pan-African Payment and Settlement System in 2022, for example, has allowed payments across Africa in any of the local currencies, and is a major step forward. Nevertheless, even if cumbersome tariffs and ineffectual procedures are addressed, a major hindrance has been and remains infrastructure. While this is widely accepted, the way to pay for roads, rail, air, and digital is far from settled, according to the United Nations. This has particularly been an issue recently, given the recent rising debt levels and stagnating or lower economic activities in several African economies.
Improving financing for development
The African Continental Free Trade Area could function as the proverbial engine of growth for African economies, absorbing potential losses in exports from the Trade Wars and structurally transforming economies. But only if the financing of infrastructure is accelerated in parallel with easing trade restrictions and procedures.
The crux is to combine the efforts of international financing institutions and local governments to promote innovative financing schemes and lower the risk of such instruments, such as using pension fund capital for infrastructure development.
Finding a way to transform economies, and thereby improve livelihoods, is necessary – economically, but also to cope with adjacent development challenges, such as addressing migration, climate change, and inequalities.
LSE
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