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WTO Under Siege: Trump’s Trade Policy & Ripple Effects on EAC

WTO Under Siege: Trump’s Trade Policy & Ripple Effects on EAC
WTO Under Siege: Trump’s Trade Policy & Ripple Effects on EAC

The global trade landscape is unraveling. President Trump’s “America First” doctrine has unleashed a barrage of unilateral tariffs, targeted trade barriers, and a stark rejection of multilateral norms, shaking the foundations of the post-war economic order.

For East Africa—and Kenya in particular—this upheaval threatens both opportunity and peril as the rules of global commerce are redrawn.

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A Direct Assault on the Global Trade System

Trump’s trade agenda has placed the World Trade Organization (WTO) in the crosshairs. Eschewing its principles of non-discrimination and reciprocity, the administration favors a “fair and reciprocal” approach that leans heavily on punitive tariffs to address perceived imbalances.

Experts, including Gary Hufbauer of the Peterson Institute, warn that this strategy risks blatant WTO violations—evidenced by Trump’s threats of a 25% tariff on EU exports to the U.S., a move that could ignite a transatlantic trade war (Anadolu Agency, Dec 2024).

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By sidelining the WTO’s dispute settlement mechanisms and imposing measures that flout agreed rules, the U.S. is eroding the institution’s authority. This matters profoundly for smaller economies.

The WTO has long offered a predictable, rules-based framework that East African nations depend on for market access. With power now overshadowing principle, the global trading system is tilting toward protectionism, leaving regions like East Africa vulnerable to the whims of economic giants.

East Africa and Kenya at a Crossroads

Kenya, a cornerstone of East African trade, has historically leaned on arrangements like the African Growth and Opportunity Act (AGOA) for access to U.S. markets. Yet Trump’s transactional stance casts doubt on the longevity of such preferences.

Kenya’s economy remains fragile—manufacturing accounted for just 7.8% of GDP in 2022 under the Uhuru administration, dwarfed by agriculture and services. The Kenya Kwanza government’s Bottom-Up Economic Transformation Agenda (BETA) seeks to reverse this, prioritizing industrialization.

Recent data shows manufacturing’s real Gross Value Added (GVA) grew by 1.3% in Q1 2024, down from 1.7% in Q1 2023, reflecting global headwinds and the need for deeper reforms. Trump’s policies amplify these challenges.

Escalating trade tensions—such as those with the EU—could trigger retaliatory tariffs worldwide, shrinking export markets for East African goods. If Western economies turn inward, Kenya and its neighbors face disrupted supply chains and heightened trade imbalances.

In this volatile environment, the African Continental Free Trade Area (AfCFTA) emerges as a lifeline, offering a regional buffer against global instability.

Reform or Regionalism: Charting the Path Ahead

With the WTO faltering, East Africa must weigh two strategies: reforming the multilateral system or doubling down on regional integration.

Pushing for WTO Reforms: Reviving the WTO as a more inclusive body sounds appealing but faces steep odds. Trump’s tariff threats, deemed WTO-illegal by experts like Hufbauer, underscore a broader disdain for multilateral consensus among major powers. Reform requires cooperation that currently seems out of reach.

Embracing Regional Mechanisms: The AfCFTA presents a viable alternative. By harmonizing trade rules, slashing non-tariff barriers, and boosting intra-African commerce, it offers stability amid global chaos.

Kenya is already positioning itself as a regional hub, with investments like the Standard Gauge Railway and Mombasa Port upgrades aimed at bolstering manufacturing and logistics.

These moves align with BETA’s vision of industrialization as a counterweight to Western service-driven models, echoing thinkers like Eamonn Fingleton who champion manufacturing’s role in sustainable growth.

Kenya’s strategy blends domestic innovation—mobilizing local capital and leveraging concessional finance—with regional ambition. This approach aims to build fiscal resilience and reduce dependence on unpredictable Western markets.

Strategic Imperatives for East Africa

To thrive in this shifting landscape, Kenya and its neighbors must act decisively:

1. Diversify Export Markets: As U.S. protectionism looms, East Africa should target intra-African and emerging markets—Asia and the Middle East, for instance—for manufactured goods.

2. Fast-Track AfCFTA: Streamlined customs, unified standards, and infrastructure upgrades are critical to unlocking the bloc’s potential.

3. Double Down on Industrialization: Emulating Japan and South Korea, Kenya must prioritize high-value manufacturing and robust local supply chains.

4. Strengthen Regional Diplomacy: Collective bargaining on the global stage will amplify East Africa’s voice, countering the dominance of larger economies.

A Call to Action

Trump’s assault on the WTO—exemplified by tariff threats that defy international rules—marks a pivotal moment for global trade.

For East Africa, passivity is not an option. Kenya must lead the region in crafting a resilient economic model, rooted in manufacturing and regional integration, to weather the storm of protectionism.

The choice is stark but promising: leverage AfCFTA to forge a self-reliant future. In an era where the old order is crumbling, East Africa must seize this chance to redefine its place in the world. The clock is ticking.

Timothy Kamau Nyenjeri writes on Political economy, International trade, and Geopolitics.

 

WTO Under Siege: Trump’s Trade Policy & Ripple Effects on EAC

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