How Trump's tariffs hit the African country that makes America's jeans

Behind the big-man posturing, the enduring legacy of Trump’s tariffs will be the crushing of emerging economies in the developing world.

Imposing the most punitive tariffs on Lesotho for making jeans for America might grab headlines. But the market carnage behind it will hit countries in Africa from both ends of the global value chain. The plunge in global stocks is sending investors fleeing from emerging markets and leaving currencies weakened across the developing world.

There was a time when the USAID, World Bank or IMF could assist: but they too are now impacted by Trump’s assault on global institutions.

The value chain squeeze: how tariffs hurt Africa most

Globalisation means that in an integrated economy dozens of countries contribute to different stages of production — mining, refining, assembling, marketing – to create a global value chain. This is measured through Trade in Value Added (TIVA) which looks at where the real value is created.

Raw materials — as exported by many African economies — have the lowest added value. The real profit lies further up the chain: in processing, branding, retailing. Take a $25 T-shirt sold in the U.S:  stitched in Lesotho, dyed using Chinese chemicals, made from cotton grown in India, and branded by a U.S. company. Lesotho’s share? A tiny fraction of the final price.

Tariffs increase costs, but these aren’t spread evening through the value chain. Instead:

• Importers raise prices or seek cheaper inputs

• Manufacturers cut costs

• Suppliers get squeezed

  
  

And at the far end — with the least power to push back — sit African exporters of raw materials and low-margin goods. They can’t raise prices. They are forced to absorb the shock.

The bargaining power paradox

This leads us to a painful irony. Africa holds some of the world’s most critical raw materials central to the green transition of developed economies:

• 70% of global cobalt (DR Congo)

• Nearly 40% of manganese reserves

• Major bauxite reserves (Guinea)

• Strategic rare earths, lithium, gold, copper

  
  

But because most of these resources are exported unprocessed, Africa loses bargaining power. The continent ends up selling cheap and buying expensive. The branding, processing, and profit margins happen elsewhere. This makes African economies structurally vulnerable to global trade shocks — like tariffs — and to the global market volatility they create.

Take Lesotho, where textile factories dependent on US markets now face the biggest of Trump’s tariff hikes - 50%. Or South Africa, whose auto parts industry already struggling to compete under new duties, faces a 31% tariff. Both economies are now seeing investor pullback, exchange rate pressure, and rising import prices.

Tariffs trigger market alarms — and deliver a second blow

The latest tariffs haven’t just raised costs. They’ve spooked financial markets and, as The Economist reported, caused global investors to abandon emerging markets in search of safer assets like government bonds in developed countries.

This has major implications for African economies:

• Currency depreciation: Local currencies are weakened, pushing up the cost of essential imports like food and fuel.

• Capital flight: Investors pull out of African markets, draining reserves and drying up investment.

• Debt distress: Most African governments hold dollar-denominated debt. As local currencies fall, debt repayments become more expensive.

• Inflationary pressures: Import costs rise, especially on goods like medicine, fuel, and machinery.

  
  

What trade in value added data reveals — and why it matters

Many African countries retain less than 10% of the final value of they goods they produce. This is shown in the TIVA database for the continent produced by the OECD and WTO. It’s a shockingly low return for a continent that is rich in resources but ill equipped to absorb the costs of Trump’s tariffs. Thus, for developing countries, the tariffs are not just a trade issue, they’re a development issue. And without major structural reforms, the same patterns will recur every time global markets turn volatile.

Best- and worst- case scenarios for African markets

There are two broad paths for African economies post the tariffs: one hopeful, one more troubling.

In the best-case scenario, U.S. financial markets stabilise relatively quickly. The Federal Reserve maintains steady, low interest rates, reassuring investors and reducing pressure on global capital flows. As a result, capital begins to return to emerging markets, helping African currencies hold their value. With exchange rates steady and borrowing costs contained, African governments are better able to manage their debt burdens. Crucially, they can preserve the fiscal space needed to continue investing in infrastructure, health, and education. In this version of the future, Africa rides out the turbulence — fragile but intact.

But the worst-case scenario is much bleaker. If financial volatility persists and investors continue to leave emerging markets, African currencies could tumble, making servicing dollar-denominated debt far more expensive and squeezing national budgets. Central banks would be forced to raise interest rates sharply to stem capital outflows, which in turn would stifle domestic investment and slow economic growth. Inflation would surge — especially for imported essentials like fuel, medicine, and food — placing new burdens on households already facing rising living costs. Governments might respond by cutting social spending, deepening inequality and slowing even further development progress. In this scenario, Africa faces a new wave of debt crises and regional recession.

The road ahead will depend on both global financial trends and how effectively African economies — with support from international partners — prepare for and respond to these mounting pressures.

Escaping the legacy

Africa’s vulnerability in the global economy is in great part the result of a deeply entrenched global economic system, shaped by colonial extraction, historic power imbalances, and decades of unequal trade relationships. These legacies have limited the space for industrialisation, fragmented regional markets, and contributed to debt dependence and narrow export structures.

Despite these challenges, Africa is not without options. The continent can strengthen its position in both trade and finance — but this requires a coordinated, long-term effort focused on three key areas: Adding more value at home, strengthening financial resilience and engaging in strategic trade agreements.

1. Adding more value at home

Africa can climb the global value ladder by:

• Refining minerals locally: Instead of exporting raw cobalt or bauxite, countries can invest in domestic processing to create higher-value, intermediate or finished goods.

• Manufacturing finished products: Supporting local industries, particularly in textiles, agriculture, and clean energy technologies, helps create jobs and retain more economic value.

• Retaining more value: Capturing a greater share of the value chain doesn’t just increase income — it enhances bargaining power in global markets.

  These steps can be accelerated through global partnerships, investment in skills, and smart industrial policies that reflect national strengths and regional goals.

  
  

2. Strengthening financial resilience

The impact of global financial shocks is magnified in countries with high debt burdens, low reserves, or volatile currencies. Building financial buffers is critical:

• Expanding foreign reserves helps cushion against currency swings and capital flight.

• Deepening domestic capital markets can reduce reliance on external borrowing and support long-term investment.

• Reducing exposure to hard currency debt by encouraging local currency borrowing or regional financial instruments improves stability and lowers vulnerability.

  
  

Multilateral support — including fairer debt restructuring mechanisms and climate finance — will be essential to back these efforts.

3. Engaging in strategic trade relationships

Africa’s trade relationships must evolve to reflect its actual contribution to global production — and its potential for growth. That means:

• Negotiating fairer trade terms that promote value addition and discourage raw resource dependency.

• Using Trade in Value Added (TiVA) data to accurately show Africa’s role in global supply chains — beyond just exports.

• Leveraging the African Continental Free Trade Area (AfCFTA) to build regional value chains, reduce fragmentation, and speak with a stronger collective voice in global negotiations.

  
  

These strategies won’t erase centuries of structural inequality. But they can tilt the balance, gradually shifting the terms of engagement toward a fairer and more resilient economic future.

Conclusion: When the global economy sneezes, Africa gets pneumonia

As the world is learning – or rediscovering – tariffs are chain events that trigger uncertainty, panic, and market carnage. In the case of Trump’s tariffs, the buck will stop with Africa – whose economies, the hardest hit and most vulnerable, will end up paying twice. Once in trade, and again in finance. Until Africa captures the value it helps create — and builds resilience against shocks it didn’t cause — it will remain dangerously exposed to decisions made far beyond its borders.

References

1. The Economist (2025). Market carnage goes global

2. OECD-WTO TiVA Database: https://www.oecd.org/industry/ind/measuring-trade-in-value-added.htm

3. UNCTAD (2023). Economic Development in Africa Report

4. AfDB (2021). African Economic Outlook – Industrialising Through Trade

5. World Bank (2020). Africa’s Resource Export Dependency

6. BBC News (2025). U.S. tariffs hit Lesotho’s economy

7. The New York Times (2025). Lesotho Faces U.S. Tariff Blowback

8. France24 (2025). Trump Slaps Tariffs on Africa

9. Al Jazeera (2025). Trump Imposes 50% Tariff on Lesotho