A 35 percent tariff on second-hand clothes, graft, and a series of temporary tax waivers to curb rises in domestic food prices are among key trade barriers flagged by the US, prompting President Donald Trump to hit Kenya with a 10 percent reciprocal tariff on Wednesday.
Kenya is among 180 countries that were on Monday captured in a report on trade partners whose policies and regulations the US regards as trade barriers.
The report by US Trade Representative (USTR) Jamieson Greer was published on Monday - two days before President Trump hit global trading partners with reciprocal tariffs.
Mr Greer in his report flagged Kenya’s tax policy on second-hand clothes, popular as mitumba, and clean energy stoves as well as price subsidies on key agricultural products as a barrier to trade.
“Among the imports that are impacted by the 35 percent fourth tariff band are US exports of secondhand clothing and environmentally cleaner cooking products. Many textiles and agricultural products are classified as “sensitive items” under the EAC and as a result, are under the EAC and as a result, are subject to ad valorem tariff rates above 35 percent,” the report said.
Trade barriers cited in the report include average applied tariff rates and non-tariff barriers ranging from burdensome food safety regulations to renewable energy requirements and public procurement rules.
“No American President in modern history has recognised the wide-ranging and harmful foreign trade barriers American exporters face more than President Trump,” Mr Greer said on Monday when he published the report.
“Under his leadership, this administration is working diligently to address these unfair and non-reciprocal practices, helping restore fairness and put hardworking American businesses and workers first in the global market.”
The report influenced President Trump’s reciprocal tariffs announced on Wednesday as the US aimed to match other countries’ higher tariff rates for specific goods and compensate for non-tariff barriers that put America’s exports at a disadvantage.
“Kenya applies the East African Community (EAC) Customs Union’s Common External Tariff (CET), with four tariff bands: (1) zero percent duty for raw materials and inputs, (2) 10 percent duty for processed or manufactured inputs, (3) 25 percent duty for finished products, and (4) 35 percent for a list of products the EAC concluded would promote regional integration and domestic industrial sectors,” the US Trade Representative pointed out.
The US said the high special taxes include rates of 50 percent for some textiles, 60 percent for most milk products, 50 percent for corn and corn flour, 75 percent for rice flour, 50 percent for wheat flour, and 100 percent for sugar—a position it said disadvantaged American producers.
“When deemed necessary, the Kenyan government has temporarily waived agricultural tariffs to stabilize prices when domestic agricultural prices exceeded certain levels. When the Kenyan Government has taken such action, it has applied for and regularly received from the EAC an exemption from the CET,” the report said.
The US also flagged trade facilitation and customs barriers as well as persistent graft and sloppy procurement processes in Kenya.
“US companies have raised concerns about the length of time required for Kenyan Customs to release shipments, as well as the use of a complex and inefficient process that involves many steps with uncoordinated offices, despite the implementation of a single window system,” it said.
“Many US companies have commented that Kenya’s one-stop customs clearance system does not operate as intended and that pre-arrival processing of electronic documents is ineffective. Other US companies have raised concerns about the inconsistent application of classification and valuation decisions, as well as unnecessary transit inspections.”
The US also took issue with bribery and corruption as other barriers to its trade ties with Kenya, pointing out that American firms remain disadvantaged in State tenders.
“Corruption remains a substantial barrier to doing business in Kenya. US firms continue to report challenges competing against foreign firms that are willing to ignore legal standards or engage in bribery and other forms of corruption,” the USTR said.
“Corruption is widely reported to affect government procurements at the national and county levels. Kenya has not effectively implemented its anti-corruption laws. US firms continue to report direct and indirect requests for bribes from multiple levels of the Kenyan government.”
Analysts said President Trump’s tariff decision is likely to impact the competitiveness of Kenya’s exports to the US.
“Tea and coffee competitiveness could decline, while healthcare costs may rise due to medical equipment tariffs,” Afreximbank Research said in a note.
Investments, Trade, and Industry Cabinet Secretary Lee Kinyanjui confirmed that Kenya expects a hit on its exports to the US.
“The major challenge posed by the US reciprocal tariff is the increased costs for Kenyan exports. While the 10 percent tariff is lower than the competitors’ tariffs, it still raises the costs for Kenyan businesses exporting to the US,” Mr Kinyanjui said in a statement.
“While Kenyan exports to the US will now face a 10 percent tariff, this is significantly lower than the rates imposed on key-textile importing competitors like Vietnam (46 percent) Sri Lanka (44 percent), Bangladesh (37 percent), China (34 percent), Pakistan (29 percent) and India (26 percent),” he added.
Kenya’s leading imports from the US are mineral fuels, oils, distillation products, machinery, cereals such as wheat, and pharmaceutical products.
The country, on the other hand, sends agricultural produce such as black tea and coffee, macadamia nuts, apparel/clothing, and titanium to the US where most exports access the US market on preferential treatment under the Africa Growth Opportunity Act (Agoa), which is due to lapse on September 30.
Exports under Agoa in 2023 stood at Sh50.8 billion, falling from Sh56.7 billion in 2022, and represented 79.1 percent of the Sh64.2 billion total exports by Kenya to the United States.
The balance of trade between Kenya and the US is to the benefit of the latter, with imports from the world’s largest economy outpacing domestic exports by Sh48.5 billion at Sh112.7 billion in 2023.
