Kenya sees a potential opportunity in the new US tariffs, hoping that the lighter penalties compared to its rivals could give it an advantage in the escalating global trade tensions. But turning that advantage into real gains could be difficult.
As governments around the world grapple with President Donald Trump’s latest tariffs, Kenya has expressed optimism that it can outpace its Asian textile rivals. Goods from Kenya, which exported $737 million worth of goods to the US last year, face a tariff of at least 10%, compared with higher rates for Vietnam (46%), Sri Lanka (44%) and Bangladesh (37%).
“Kenya can be an alternative sourcing hub for global buyers as other textile exporting countries face higher tariffs,” said Trade Minister Lee Kinyanjui.
Economists said other emerging producers in East Africa, such as Tanzania and Ethiopia, and Latin American countries such as Brazil could also benefit from a lower 10% tariff rate.
But Kenya’s rise could be undermined by broader economic challenges. Fears of a global recession are rising; J.P. Morgan has raised the probability of a year-end recession to 60% after China’s retaliation, while Goldman Sachs has raised the probability of a U.S. recession to 45%.
Pankaj Bedi, chairman of Kenya’s largest clothing maker United Aryan Ltd., said local manufacturers already struggle with production costs that are about 20% higher than global rivals because of expensive electricity and tariffs. He questioned whether international brands would be quick to move production to Kenya.
“A short-term tariff gap does not create real competitiveness,” Bedi said. His company supplies major U.S. retailers such as Target, Walmart and Levi’s.
Concerns are also growing over the African Growth and Opportunity Act (AGOA), a key US trade program that allows duty-free African exports, which is set to expire in September. Trade experts believe the new tariffs could signal the end of AGOA, which was once seen as likely to continue in some form.
Impact on Kenya’s Business Sector Outside the US
Tariffs are shaking up Kenya’s global trade relations. J.P. Morgan said that while African countries are exporting less directly to the US, their economic ties with the European Union and China are more important.
Kenya exported $1.35 billion worth of goods to the EU and $228 million to China in 2023, according to UN data. The slowdown in these major economies due to US tariffs could return to Kenya.
Trade Minister Kinyanjui acknowledged the broader risks on Monday. “We are projecting serious impacts across all sectors and the fear of a recession is now a clear challenge, especially for developing countries,” he said.
Kenyan manufacturers have expressed concern that the tariffs could erode their competitiveness in the U.S. market. “Kenya’s exports to the U.S., which were previously duty-free under AGOA, will now face additional costs that will reduce their competitiveness in the market,” the Kenya Manufacturers Association said in a statement.
Still, some businesses are moving forward. Jaswinder Bedi, whose company supplies U.S. wholesalers, plans to triple its workforce to more than 3,000 with a new factory.
“Our comparative advantage has actually increased,” Bedi said. “Look at the tariffs imposed on our competitors.”
Much will depend on whether Kenya can secure better terms through negotiations with Washington. U.S. Treasury Secretary Scott Bessent said more than 50 countries have opened talks with the U.S. since the tariffs were announced on Sunday. It remains unclear whether Kenya is among them.
Vietnam, one of Kenya’s biggest textile rivals, is moving quickly after its leader To Lam agreed to hold talks with President Trump last week.
Kenya launched its first trade talks with the U.S. during Trump’s first term in 2020, and new talks for a trade and investment partnership began under President Joe Biden. But those talks were not completed before Trump returned to office.