The Central Bank of Kenya (CBK) has termed the impact of US President Donald Trump’s 10 percent tariff on Kenyan exports as immaterial amid fears of a global recession.
The apex bank has forecast that Kenyan exports to the US are likely to fall by only Sh12.9 billion ($100 million) in the aftermath of the latest wave of reciprocal tariffs.
“In the extreme case, if that does not change, we expect the 10 percent tariff to have an impact of reducing our exports to the US by roughly $100 million (Sh12.9 billion),” CBK Governor Kamau Thugge said at a news conference yesterday.
“It’s still relatively small compared to our GDP, which is north of $122 billion. We also don’t expect that the $100 million hit would have any significant impact on the overall balance of payments and the exchange rate.”
President Trump last evening announced a 90-day pause on all the reciprocal tariffs that went into effect at midnight, with the exception of China.
Tariffs on China will be increased to 125 percent from 104 percent, he said, adding that a substantially lowered reciprocal tariff during this period of 10 percent will remain.
He was, however, silent on pausing the 10 percent universal tariff on all trading partners. But the CBK yesterday put on a brave face, saying Kenya’s expected hit of Sh12.9 billion accounts for less than 1.2 percent of the country’s export of more than Sh1 trillion.
Experts had mixed reactions to the CBK’s views following the tariffs, with some agreeing with central bank and others seeing a de-escalation as US trading partners rush to fresh trade pacts.
Still others reckon that a global economic turmoil could affect remittances from Kenyans working abroad and hurt other exports due to reduced demand.
While the tariffs have ignited wildfires across global stock markets, the big question is whether the world could be headed into a recession.
An economy is defined as being in recession when the total of everything we and the government spend or export shrinks for two successive three-month periods.
If the tariffs push the US itself towards recession, that will weigh heavily on developing countries whose fortunes are closely tied to those of the world’s largest economy.
“Any external shock usually has a larger bearing on developing countries such as Kenya. Investors and consumers are likely to adopt a wait-and-see approach, resulting in reduced economic activity, including the demand for Kenyan exports in destination markets,” said Edward Kusewa, an economics lecturer at St. Paul’s University.
The World Trade Organization (WTO) has indicated that the new tariffs introduced by the US, along with those implemented at the beginning of the year, could result in a contraction of approximately one percent in global merchandise trade volumes in 2025.
The chief economist at Mentoria Economics, Ken Gichinga, expects a de-escalation of the tariff spat, arguing that a settlement will limit the damage to Kenya’s economy.
He cited the case of countries such as Vietnam and South Korea that have approached the US for a deal to thaw the tariff fights.
“A lot of people have been caught up in the political rhetoric around tariffs. I think we will see more countries negotiating with the US and we have already seen several envoys seeking to negotiate with the US to end the reciprocal tariffs,” he said.
“Many of these tariffs will disappear as more countries come to the table to negotiate.”
The Ministry of Investment, Trade and Industry said it expects to see increased costs for Kenyan businesses exporting to the US, especially textile exports that account for the majority of shipments to America.
The hit to Kenyan exporters is deemed as modest when compared to other textile exporting competitors, including Vietnam, Sri Lanka, Bangladesh, and China, which were hit with reciprocal tariffs of 46 percent, 44 percent, 37 percent and 34 percent, respectively.
“The major challenge posed by the US reciprocal tariff is the increased costs for Kenyan exports. While the 10 percent is lower than the competitors’ tariffs, it still raises the cost for Kenyan businesses exporting to the US,” said Trade Cabinet Secretary Lee Kinyanjui.
Kenya shipped goods worth Sh64.2 billion to the US in 2023, translating to less than 10 percent of the country’s total exports in the same year at Sh1 trillion.
An estimated 79.1 percent of the exports or Sh50.8 billion accessed the US market duty-free under the Africa Growth and Opportunity Act (Agoa). This includes apparel, macadamia nuts, coffee and black tea.
Kenya found itself on Trump’s tariff radar for, among others, a 35 percent tariff on second-hand clothes, graft and a series of temporary tax waivers to curb rises in domestic prices.
It was among 185 countries and territories captured in a report by the US Trade Representative (USTR) Jameison Greer, which identified policies and regulations regarded by the United States as trade barriers.
The US also flagged trade facilitation and customs barriers as well as persistent graft and sloppy procurement processes in Kenya.
Bribery and corruption were cited as another trade barrier between Kenya and the US, which said that American firms were disadvantaged in State tenders on their failure to offer kickbacks.
Kenya was deemed to have slapped US imports with an equivalent 10 percent tariff, prompting a reciprocal tariff charge of 10 percent on its exports.
The country imported goods worth Sh112.7 billion from the US, leading to a trade deficit of Sh48.5 billion in favour of America.
Kenya’s main imports from the US include mineral fuels, oil, distillation products, machinery, cereals and pharmaceutical products.
