Lesotho is engaging with the Trump administration in the hope of clinching a last-minute trade deal to avert what would be a catastrophic 50% tariff on its exports to the US, due to begin this Friday.
Lesotho's minister of trade, industry & small business, Mokhethi Shelile, told Business Times that the mountain kingdom, which exports about $228m (about R4bn) worth of goods to the US, was still engaging with the administration of President Donald Trump in an attempt to avoid or reduce the tariffs, which could decimate its small economy.
“We are waiting for a response from US trade representative Jamieson Greer for the tariffs that will be applicable for Lesotho,” Shelile said. “We have been informed that there will be a sub-Saharan African tariff that will apply to all countries in the region, except for the big economies.”
Lesotho declared a national state of disaster over its high youth unemployment and job losses as uncertainty over the tariffs hit the landlocked nation. Its annual GDP of about $2bn is highly reliant on exports, mostly of textiles, to the US. It has 11 factories that export clothing, predominantly denim, to the US and provide 12,000 jobs.
Shelile said they were waiting on the Trump administration after his government's counter-offer. He would not divulge details of the offer. “We have been engaging in trade offers. We got an offer from them, and we sent something back. They asked us to explain some details and we gave them all the information.”
In April Trump announced 30% “reciprocal” tariffs on South Africa and other African countries, only to suspend them for 90 days until August.
Shelile said the tariffs had the effect of nullifying the benefits of the African Growth and Opportunity Act (Agoa), which allows certain exports from sub-Saharan African countries to enter the US market duty-free.
His country was now speeding up efforts to diversify its export markets, he said. “At this point, the Southern African Customs Union, which includes South Africa, Namibia, Eswatini and Botswana, is the primary and most logical market to go for. We have been doing that since June last year, simply because the US market was beginning to show itself to be problematic for our producers. It takes a long time to get materials from China, process them here and ship them to the US, which can take six months.”
Lesotho was also looking at participating in the African Continental Free Trade Agreement (AfCFTA) and was sending goods to the burgeoning consumer market in Nigeria, though this would require considerable investment in network and logistics infrastructure development between African regions, Shelile said.
We are now starting discussions and negotiations with Nigeria to see if we can ship goods there. It looks a much more promising market. I think we will be able to take things to Durban and then get some cargo ships to Lagos.
— Mokhethi Shelile, Lesotho's minister of trade, industry & small business
“We are now starting discussions and negotiations with Nigeria to see if we can ship goods there. It looks a much more promising market. I think we will be able to take things to Durban and then get some cargo ships to Lagos.”
He said Maseru was in discussion with the EU to agree on access to that market. Officials from the UK have already visited to discuss selling Lesotho-made products there.
South Africa is also waiting for a template from the US trade representative, as it too seeks to clinch a last-minute trade deal. Its critical exports to the US, including vehicles, citrus products and wine, are at risk due to Trump's proposed 30% tariff.
Addressing the National Council of Provinces in parliament on Thursday, trade, industry & competition minister Parks Tau said protectionist trade policies from the Global North presented challenges, but South Africa was engaging with the US for a solution.
“We have been tirelessly working with our US counterparts,” Tau said. “Having submitted our framework deal, we have signed a condition precedent document, a precursor to the finalisation of our trade negotiations with the US.
“Our collective work, which includes business, organised labour and civil society in engaging the US Congress, is also a key lever in our approach for ensuring the continued inclusion of South Africa in Agoa, and to respond to the recently proposed US-South Africa Bilateral Relations Review Act.”
Tau told parliament in a written reply that the framework deal South Africa had submitted to the US constituted a proposal that would be subject to negotiations. “The framework agreement covered, among other elements, the procurement of US products such as liquefied natural gas (LNG), complemented with US investment in gas infrastructure in South Africa and co-operation in key technologies to unlock production of gas in South Africa,” he said.
“[It includes] addressing agricultural market access for both countries, promoting two-way investment and improving the investment climate. Areas of future co-operation [include] tariffs, digital trade and critical minerals.”
On the sidelines of the launch of the BMW X3 plug-in hybrid vehicle in Pretoria, President Cyril Ramaphosa told reporters the government would continue to engage with the US on ideas and proposals for a trade framework that could be approved and formalised “in the coming days”.
Trade, industry & competition spokesperson Kaamil Alli said the department’s team was negotiating with the US in an attempt to avert the tariff deadline coming into effect.
“We are working on a number of fronts, trying to negotiate in the areas of interest to the US while preserving our interests,” Alli said. “Our framework deal did include procuring LNG from the US ... We have not received substantive feedback on the framework deal.
“The minister and the department have been working towards a greater diversification of our export trading partners. This includes export and investment drives with a number of countries, including countries in the EU like Germany and France, and Japan and China.”
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