The global trade system is once again under pressure. As the United States repositions its strategy on African market access—imposing tariffs on key exports and stalling renewal of the African Growth and Opportunity Act (Agoa)—African economies face a familiar question: how insulated are we from the next global disruption?
In Kenya’s case, the initial answer appears reassuring. Exports to the US in 2023 stood at approximately Sh50.8 billion, of which nearly 79 percent were Agoa-supported.
That represents just 1.2 percent of Kenya’s total export earnings—exceeding Sh1 trillion—and suggests limited macroeconomic vulnerability. The trade balance, external reserves, and the exchange rate are not immediately threatened by this shift. From a traditional macroeconomic view, the shock seems contained.
But the apparent comfort of aggregate data can obscure the real story. For Kenya’s apparel and textile sector—particularly firms anchored in Export Processing Zones—the US market is not just a destination; it is the foundation of business models, cash flows, and employment contracts.
These firms expanded aggressively under Agoa’s duty-free incentive structure. In doing so, they built scale, attracted global buyers, and created tens of thousands of jobs, particularly for low-income women.
Now, with a 10 percent tariff in place, those same firms are confronting the sharp edge of exposure. Many operate on tight margins, dependent on pricing competitiveness to win and retain US contracts.
The cost shock, though moderate in policy terms, is significant in operational terms. For some, it will mean renegotiation. For others, it may mean withdrawal.
What makes this tension more revealing is that not all firms will respond the same way. Across the sector—and indeed across all exposed export clusters—there is substantial heterogeneity.
Some firms are deeply embedded in US supply chains with little market diversification. Others maintain multiple export destinations and may shift capacity or pricing more flexibly.
Some built their scale with patient capital; others operate with volatile cash cycles and less room to adjust. This variation determines who absorbs the cost, who transfers it, and who exits the market altogether.
Such firm-level divergence is not unique to Kenya. Across the continent, the trade war’s ripple effects are exposing the limits of preference-based export models. In Lesotho, a 50 percent tariff has cast a shadow over the textile sector that had become its economic backbone.
Ethiopia’s garment sector, once a poster child of industrial policy, contracted rapidly after a combination of trade suspension and geopolitical tensions. In both cases, the macro figures did not shift dramatically at first—but the firm-level exits came early and carried real long-term consequences.
Kenya’s exposure today is lighter by comparison. But the lessons are here. Macroeconomic indicators often absorb shocks slowly, while firms and communities feel the pinch quickly.
What shows up as a muted number in the trade deficit may mask shrinking order books, thinning payrolls, and silent stress in industrial zones.
In places like Athi River, Kitengela, and Thika, these changes are not theoretical—they are beginning to materialise as decisions on shift cuts, wage delays, and paused expansion plans.
The deeper insight is this: resilience can no longer be measured only by ratios. It must also account for rhythm—how sectors and firms behave under pressure, how quickly they adjust, and how flexibly they can reposition. Firm heterogeneity is not a technical footnote—it is the new face of macroeconomic complexity.
The same external shock affects firms differently, and those differences, aggregated across a vulnerable sector, eventually become macro-relevant.
This does not call for alarm, nor does it negate the strength of Kenya’s macroeconomic footing. Rather, it highlights an emerging frontier for economic foresight.
Stability at the national level is essential, but so is sensitivity to the shifting dynamics within sectors that drive exports and jobs. As trade preferences fade and global competition sharpens, the ability to detect early signals at the firm level will become central to anticipating broader economic shifts.
Kenya’s experience is instructive: the effects of a trade war may not show up first in GDP or reserves, but in factories that grew fast and now struggle quietly.
In such a moment, listening to firms is not an act of intervention—it is an act of awareness. It is how economies learn to protect their gains without waiting for the losses to pile up.
The writer is a macroeconomist and serves as a researcher in business analytics at the Kenya Revenue Authority
