In Lesotho, a small nation in southern Africa, one of the countries that was hit hardest by President Trump's new tariffs, business owners met on Wednesday to strategize their response.
For countries with an economy worth just $2.1 billion, there are few options on the table.
Trump has imposed a 50% tariff on Lesotho due to the 2.3 million country and the US trade deficit. Only St. Pierre, a French archipelago with a population off the coast of Canada, suffered the same increase in tariffs.
On Wednesday, Lesotho's private sector had been asking the government for answers. The government was facing a massive unemployment outlook and was preparing to make that claim to the White House.
“There's a lot of panic,” said business analyst Thabo Qhesi, who attended a meeting of business owners in Maseru, Lesotho's capital. He said the most unsettling people in the room are those connected to Lesotho's textile and apparel industries, which export about 70% of their products to the United States.
“They have no choice but to close or relocate to a more profitable country for them,” Qhesi said.
Most of Lesotho's clothing factories are owned by Chinese and Taiwanese companies that have established shops to take advantage of the priority terms permitted under the African Growth and Opportunity Act, a trade agreement with the US.
The deal, set to expire later this year, has been a boon for Lesotho. Completely surrounded by South Africa, the continent's most industrialized economy, Lesotho has finally relied on bias towards its neighbours for trade, and was able to search for even more remote markets.
Lesotho began making denim mainly for brands like Levi and Wrangler, according to Lesotho merchant Moketi Sherrill.
The new tariffs effectively cancel the African trade agreement months before it is due to expire in September.
Lesotho still wants to revive the terms of growth and opportunity law, Cher said. “The livelihoods of 12,000 Basotho are at risk,” he told a Lesotho journalist. “We can't afford to lose these jobs. We must continue to fight for Agoa's renewal to protect our people and our economy,” he said.
Lesotho sends 45% of its exports to the United States after being a beneficiary of US trade policy. This includes rough diamonds and masses.
The US has a $234.5 million trade deficit with Lesotho, which would be difficult to reduce. Most people in Lesotho have the spending ability that is part of the average American and cannot afford to buy US products.
The Lesotho clothing factory is the country's largest private employer, providing up to 36,000 jobs, primarily for women. The wages of these workers support related industries such as transportation and financial services, and if factories close, everything will suffer, Qhesi said.
One option Lesotho has is to find new export markets and find new trading partners, but that could take months, he said.
The Lesotho government said it would send a delegation to the US to negotiate a new bilateral trade agreement.
