Veriton Investment

Trump tariffs deliver shock ‘wake-up call’ to a world denim hub

(Bloomberg) — One of the world’s poorest countries is reeling from the impact of US President Donald Trump’s tariff regime, which has crippled its key textile industry and exacerbated already high unemployment.

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That’s how the historic pivot in US trade policy is unfolding in Lesotho, the landlocked, southern African mountain kingdom whose denim manufacturing has been a rare economic bright spot. Trump initially put 50% levies on imports from Lesotho, the highest in the world. Despite a cut to 15% in August, those duties still outstrip those on competitors like Kenya, and some factories have eliminated jobs as orders dried up.

“We are still in negotiations with the US government on a further reduction, maybe to 10% or to zero — where we were before,” Prime Minister Sam Matekane said in an interview with Bloomberg Television’s . “The introduction of the tariffs have put us in a disadvantaged position” because businesses can relocate to countries where levies are lower, he said.

Textiles is the biggest industry in Lesotho, a country of about 2.3 million people. Those businesses employ 12,000 people and indirectly support 40,000 jobs, supplying US retailers such as Walmart Inc., JC Penney and Levi Strauss & Co. Before the new tariffs, most of of the country’s exports to the US — its second-biggest trade partner — entered duty-free under the now-defunct African Growth and Opportunity Act.

Before Trump took office, Lesotho’s central bank forecast modest expansion this year and next for textile and clothing manufacturing. The new outlook: contractions of 9.9% and 13.3%. Trump’s tariffs are based on countries’ trade balance with the US, and Lesotho imported less than $3 million in goods from the US last year, compared with exports of more than $235 million.

Teboho Kobeli, the founder of Lesotho-based Afri-Expo Textiles, said the tariffs came as a major shock, comparable with the coronavirus pandemic. At the very least, Trump’s targeting of the country serves as a “wake-up call” and an opportunity to change the way the economy operates. Unemployment was 30% last year, the most recent data show, ranking among the world’s highest.

“I would say ‘Thank you, President Trump, for making Lesotho known,’” he said. “For the president of a powerful country like the US to mention Lesotho in his Congress is, you know, a powerful marketing tool.”