By Ebehi Iyoha | On 2^nd April 2025, a day termed "Liberation Day" by the President Donald Trump administration, the United States announced a slew of unilateral tariff increases on nearly all of its trade partners. In the weeks that followed, some of the new tariffs were paused for 90 days, several products were granted exemptions, and US-China trade relations have significantly worsened through a series of escalating tariffs.

Although the future of US trade policy remains in question, these developments undoubtedly mark a significant departure from the multilateral, rules-based trading system shaped by the World Trade Organisation (WTO) and its precursor, the General Agreement on Tariffs and Trade (GATT). What does this dizzyingly complex series of policy changes mean for Nigeria and other African economies?

The What and Why of Liberation Day

A good starting point is to understand the size and scope of the tariffs announced on April 2. The Liberation Day tariffs had two components. The first was a 10% baseline tariff increase that took effect on April 5 on virtually all goods imported into the United States. The second was a set of country‑specific “reciprocal” tariffs targeting trade partners with which the United States ran a trade deficit in 2024. This second set was slated to take effect on April 9 but was subsequently postponed for 90 days. Energy-related goods such as coal, gas, oil, and electricity were exempt from the April 2 tariffs, as were goods already subject to sector‑specific duties, including the 25% tariffs on steel, aluminium, and automobiles. Canada and Mexico were likewise excluded from the Liberation Day announcement, though they remain subject to 25% tariffs on non‑USMCA‑compliant goods announced earlier this year.

The reciprocal tariff increases did not reflect reciprocity as is typically understood in trade policy circles—that is, matching tariffs that other countries levy on US exports. As shown in Figure 1, the announced reciprocal tariffs were far higher than the average most‑favoured‑nation (MFN) tariffs several countries apply to their imports from the United States. For example, Mauritius, whose average applied tariff on imports is below 1%, would face a 40% reciprocal tariff on its exports to the United States. For others, such as Chad and Cameroon, the reciprocal tariffs were actually below those countries’ average MFN rates. What explains this gap?

The tariffs were derived using a simple formula intended to balance bilateral trade: the US trade deficit with each country divided by US imports from that country in 2024. The resulting percentage was then halved to set the ‘discounted’ reciprocal tariff rate. If the calculated rate was below 10%, the baseline 10% rate would apply.

Source: US International Trade Administration and World Trade Organisation. Note that average MFN tariff rates exclude supplemental duties and non-tariff barriers.

The reciprocal tariff formula highlights two motivations behind the current administration’s trade policy. First, it shows that reducing the US trade deficit in goods is a top priority. Even as countries enter bilateral negotiations or firms seek tariff exemptions, a smaller trade deficit will remain the administration’s yardstick for success, rather than any individual country’s impact on US manufacturing competitiveness or employment.

This is particularly relevant for African governments deciding how to respond. Trade deficits are shaped as much by market forces and comparative advantage as by trade policy. Lesotho faced the highest reciprocal tariff of 50% because it exported roughly $237 million to the United States last year but imported only about $3 million in US goods. Given its GDP of just $2.3 billion, Lesotho cannot afford many of the more expensive goods produced by the US. Those exports represent more than 10% of Lesotho’s GDP and support thousands of jobs, yet they pose little threat to US manufacturing: 64% of its exports were apparel, amounting to less than 2% of total US apparel imports.

Second, the formula reflects a prevailing view in the administration that the US goods‑trade deficit stems from unfair practices by trading partners. Officials will therefore scrutinise not just explicit tariffs but also currency devaluation, non‑tariff barriers, capital controls, and exporter subsidies. For example, although Vietnam has offered to cut all its tariffs on US goods to zero, presidential adviser Peter Navarro argues that zero tariffs would still fall short of correcting perceived imbalances. Nigeria, whose supplemental duties push effective rates above 50 percent on some products and which maintains import bans highlighted in the 2024 US report on foreign trade barriers, will likely face similar scrutiny when the United States reviews whether to adjust its reciprocal tariff rates downward.

Who Will Bear the Brunt?

The most immediate impact has been on U.S. financial markets. The S&P 500 Index declined by 12% in the four trading days following the April 2 announcement. Even more worryingly, yields on 10‑year treasury bonds rose from about 4% to 4.5% as investors sold off their bond holdings. Typically, during stock‑market downturns, investors buy treasuries because they are considered relatively safe assets. A simultaneous sell‑off in both stock and bond markets therefore suggests diminished confidence in the broader U.S. economy.

In response, the Trump administration announced on April 9 that the reciprocal tariffs would be postponed for 90 days, while the universal 10% tariff would remain in effect. Products such as consumer electronics containing semiconductors were also exempted from the Liberation Day tariffs. Since then, the U.S. stock market has recovered more than half of its post‑announcement losses.

Source: Author’s calculations from USITC and IMF data.

More broadly, if the tariff changes are not reversed before the 90‑day window closes, countries facing high reciprocal tariffs, and whose economies depend heavily on exports to the United States, are likely to be hardest hit. Vietnam and Cambodia, for example, face rates above 40%, and exports to the United States make up more than 25% of their GDP; the short‑term effects could be significant. Multinationals that invested heavily in Vietnam after the US–China trade war during the first Trump administration have been reeling from the announcement. South Korea has announced emergency measures to support affected industries and cushion the short‑term impact. Over time, however, some effects should diminish as firms in these countries pursue alternative markets where they hold cost and quality advantages.

Countries’ responses could determine whether the situation escalates further, or tariff rates are reduced through negotiation. Several trade partners, including Israel and the EU, have opted to negotiate; China has taken a retaliatory stance. Shortly after the April 2 announcement, Beijing imposed a 34% tariff on all U.S. products and introduced new export restrictions on critical minerals such as rare earths used in electronics and batteries. Escalations during the following week pushed bilateral tariffs above 125%. Some analysts, however, view the exemption for products containing semiconductors as a sign that the U.S. administration remains open to de‑escalation.

Implications for Nigeria and other African Economies

For Nigeria and other African countries, these tariffs may effectively override the African Growth and Opportunity Act (AGOA), which has allowed eligible sub-Saharan African countries to export duty-free to the US since 2000. With AGOA set to expire in September 2025, these tariffs raise serious questions about the future of US-Africa trade relations. Kenya's AGOA-facilitated exports, mainly textiles and apparel, grew from $55 million in 2001 to $603 million in 2022. South Africa exports to the US under AGOA were worth over $3.5 billion in 2023. These trade flows now face substantial new barriers.

Source: AGOA.info

Nonetheless, the direct impact on most African economies will be much less severe than in Southeast Asia, because trade with the US constitutes a relatively smaller share of African countries’ exports and GDP. The clear exception is Lesotho, as discussed earlier. Other countries that are not broadly affected may still face acute impacts in key sectors. South Africa’s automotive industry has been impacted by the 25% tariffs on US automobile imports, which is one of the country’s largest economic sectors, contributing more than 4% of its GDP.

For Nigeria, direct impacts will be limited since oil exports, which constitute the bulk of its trade with the US, is exempt. However, if the trade war triggers a global economic slow-down, the indirect impact could also be significant. Global demand for crude oil tends to contract during periods of low GDP growth. Any significant drop in oil prices could strain government budgets and foreign exchange reserves.

A Silver Lining?

Countries facing only the baseline 10% tariff (including Kenya, Ghana, Ethiopia, Tanzania, Uganda, Senegal, and Liberia) may gain a competitive advantage relative to more heavily tariffed countries. If US importers shift away from high-tariff suppliers, these African exporters could potentially capture some market share. There may also be market opportunities created by the retaliatory tariffs.

However, this potential advantage still comes with some risks. The differential tariff rates create strong incentives for tariff circumvention, the practice of rerouting goods through low-tariff countries to avoid higher duties. Following the 2018-2019 trade war, a portion of Vietnam’s increased exports to the US could be attributed to transshipment by some Chinese-owned firms. During the final years of the Multifibre Agreement (2001-2005), when the US imposed quotas on Chinese apparel but gave African apparel duty-free access through AGOA, Chinese firms may have used some African countries as a quota-hopping export platform.

With such a wide gap between the average 145% rate on China and 10% elsewhere, the allure of transshipment is likely to be even greater. Consequently, US customs authorities are likely to intensify monitoring for such practices, potentially creating compliance challenges even for legitimate African producers.

Regardless of how the trade war unfolds over the coming weeks, the upheaval in the global trading system is unlikely to abate in the near term. African companies and policymakers need to be proactive in insuring against downside risk but also identifying opportunities for economic and geopolitical benefits. Improved trade integration through the African Continental Free Trade Area (AfCFTA) will become even more important for diversifying export markets to minimise the impact of trade war shocks.

*Dr. Iyoha, a trade economist, is an assistant professor at Harvard Business School.