Kenya risks becoming an indirect casualty of the escalating trade war between the United States and China, a conflict that is increasingly driven by national pride and economic dominance.
On Wednesday, March 5, the Chinese Embassy in the US issued a bold statement, declaring that China is “ready to fight a war if that is what the United States wants.” This comes in response to additional tariffs imposed by President Donald Trump’s administration.
The US has introduced a further 10% tariff on Chinese goods, doubling the existing rate to 20%, with the new levies taking effect on Tuesday. Mexico and Canada have also been hit with significant tariffs, signaling Washington’s determination to penalize economies it views as rivals.
In response to Donald Trump’s tariffs, China took retaliatory action by imposing its own set of countermeasures. Among them was the decision to levy tariffs on key agricultural exports from the U.S. to China.
On Tuesday, China’s finance ministry announced plans to enforce additional tariffs ranging from 10% to 15% on various agricultural goods. These include essential animal-based products like dairy and beef, as well as plant-based commodities such as soybeans and corn.
Notably, China has not only slapped tariffs on US products such as soybeans, sorghum, pork, beef, aquatic products, fruits, and vegetables, but it has also placed restrictions on 25 US firms.
As the tariff war intensifies, countries like Kenya are closely monitoring the situation, wary of the potential ripple effects on their economies.
For Kenya, the stakes are particularly high, given President William Ruto’s administration’s significant trade ties with both the U.S. and China. The country depends heavily on these economic giants for imports and exports, with tea, coffee, and flowers among its top exports to both nations. This growing tension raises concerns about how Kenya’s trade could be impacted in the long run.
These exports could take a hit, as prolonged tensions between China and the US could lead to a slowdown in global trade.
In addition, the tariff wars could lead to higher import costs of Chinese products to Kenya. If US-China tensions lead to higher costs for Chinese manufacturers, these costs could be passed down to Kenyan retailers and subsequently consumers.
With the US being a major source of foreign investment in Kenya, particularly in sectors such as technology, infrastructure, and finance, the recent fall in stock markets could potentially repel investors from developing markets like Kenya.
When US stocks decline, as was the case on Tuesday, investors often move their money to “safe” assets such as the US dollar. This increases demand for the dollar, making it far stronger than the Kenyan shilling.
A depreciating shilling drives up the cost of imports, making goods more expensive in Kenya.
However, the ongoing trade war could also present an opportunity for Kenya to strengthen its trade ties, particularly with the United States. As the U.S. looks to reduce its dependence on Chinese imports, Kenya could position itself as a key supplier.
With the African Growth and Opportunity Act (AGOA) already granting Kenya duty-free access to the U.S. market for certain products, the country has a chance to take advantage of the supply chain disruptions caused by the U.S.-China trade tensions.
Agriculture continues to be the backbone of Kenya’s economy, contributing at least a third of the country’s GDP. Farmers, therefore, could be presented with the opportunity to upscale their agricultural exports to replace Chinese suppliers.
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