Govt’s suspension of US tariffs spark mixed reactions
CLOUDINE MATOLA
A decision by President Emmerson Mnangagwa’s administration to suspend tariffs on imports from the United States (US) has sparked mixed reactions from both economic and political analysts.
While some view the move as a diplomatic gesture aimed at improving Zimbabwe’s long-standing fraught relationship with the US, others believe it is politically motivated and unlikely to yield significant economic benefits.
Trade data reveals that Zimbabwe’s exports to the US are valued at just US$60m annually, while US exports to Zimbabwe stand at US$50m, raising questions about the effectiveness of this policy shift in impacting Zimbabwe’s economic landscape.
Despite these concerns, others argue that the tariff suspension could open the door to new opportunities, particularly in terms of modernising Zimbabwe’s industries and re-industrialisation efforts.
The underlying question remains, is this policy a short-term political maneuver, or does it have the potential to reshape Zimbabwe’s long-term economic strategy?
The latest development comes at a time Zimbabwe’s diplomatic and economic relations with the US have been strained for more than two decades.
The imposition of sanctions by the US, particularly the Zimbabwe Democracy and Economic Recovery Act (ZDERA), in the early 2000s, was a response to concerns about human rights abuses, governance failures, and the land reform program. While some sanctions have been eased in recent years, tensions between the two nations have remained high, limiting the scope for cooperation in both trade and investment.
Zimbabwe’s previous government under Robert Mugabe saw the US as a key adversary, with both nations frequently at odds over Zimbabwe’s policies, particularly in regard to land redistribution and political freedom.
However, since President Mnangagwa assumed power in late 2017, there have been efforts to re-engage with the international community, including the US.
The tariff suspension announced by President Mnangagwa’s government is seen as part of this broader strategy of re-engagement and an attempt to ease diplomatic tensions with Washington.
The suspension of tariffs on US imports follows a series of retaliatory trade measures initiated by the Trump administration, including an 18% tariff on Zimbabwean exports such as tobacco, sugar, and ferroalloys.
The decision to remove tariffs on US goods is viewed by some analysts as an attempt by Zimbabwe to normalise relations and improve trade ties with the world’s largest economy.
However, the economic impact of this move has been widely debated, especially given the small scale of trade between the two countries.
Critics argue that this tariff suspension is unlikely to significantly benefit Zimbabwe’s economy, as trade volumes are so limited.
In contrast, proponents suggest that this move could potentially open up new opportunities for Zimbabwe, particularly in terms of boosting industrial development and strengthening diplomatic ties with the US.
To fully understand the implications of Zimbabwe’s decision to suspend tariffs on US imports, it is important to examine the trade dynamics between the two countries. The trade relationship between Zimbabwe and the US remains relatively small, with both nations exporting and importing goods valued at modest sums.
According to the latest trade data, Zimbabwe’s exports to the US total approximately US$60m annually.
The primary exports include tobacco, sugar, ferroalloys, and a few other agricultural products.
On the other hand, US exports to Zimbabwe stand at around US$50m, with the bulk of these exports consisting of machinery, vehicles, and agricultural equipment.
These numbers suggest that while trade exists, the volume is not substantial enough to have a transformative impact on Zimbabwe’s economy.
When comparing Zimbabwe’s trade with the US to its trade with other countries, the contrast is stark.
Zimbabwe’s most significant trading partners include South Africa, China, India, Singapore, and the UAE, countries that collectively account for a far larger portion of Zimbabwe’s imports and exports.
For example, Zimbabwe imports more than US$1bn in goods annually from China, and its trade with South Africa, Zimbabwe’s largest trading partner, is in the billions of dollars.
Given the small scale of trade with the US, economic analysts like Victor Boroma argue that the suspension of tariffs is unlikely to significantly impact the Zimbabwean economy.
“In terms of the decision by the Zimbabwean government to suspend all tariffs on goods imported by Zimbabwe from America or basically American exports, I think it’s largely a political decision based on the need to amend strained relations with the United States of America,” Boroma told Business Times yesterday.
“We have not had very good relationship with America and I think the government was trying to take that opportunity probably to use it to actually build a bridge that can be used to probably negotiate sanctions and probably lines of credit in future and even actually to build Zimbabwe’s image in the American market especially for foreign direct investment uh from American companies.
“But, I do not see how removing tariffs on American exports would actually impact the Zimbabwean economy or even the American economy itself because the trade values or the goods involved are quite negligible.
“When you look at the size of the two economies because about 60M in terms of exports from Zimbabwe and about 50M in terms of exports from America, there are obviously a drop in the ocean considering the total value of goods exported by both countries.
“So I think it’s largely a political move and it’s not going to have anything any impact on the Zimbabwean economy and it does not necessarily mean that it will improve probably the value of exports from America.
“I think the Zimbabwean market largely trades and imports from South Africa, China, India, Singapore, United Arab emirates those are our major trading partners and obviously if tariffs were to be relaxed on goods coming from such markets they need to definitely impact uh the Zimbabwean economy,” Boroma added.
Despite the limited economic impact, the decision to suspend tariffs on US goods can be seen as part of a broader strategy by the Zimbabwean government to diversify its trade relationships and foster stronger diplomatic ties with the West. Whether this move will yield tangible economic benefits remains a matter of debate, but its significance is not entirely economic—it may be more about geopolitical strategy.
The political motivations behind Zimbabwe’s decision to suspend tariffs on US goods cannot be overlooked.
For decades, Zimbabwe’s relations with the US have been defined by antagonism, particularly under the leadership of former president Mugabe. However, with Mnangagwa’s ascension to power, there has been a concerted effort to re-engage with the international community, including the US.
In the past, Zimbabwe’s economic woes were compounded by the imposition of sanctions that restricted access to international credit, loans, and investment. The lifting of sanctions has been a key priority for the current government, and the suspension of tariffs is seen as a potential step in that direction. By removing tariffs on US goods, Mnangagwa’s government may be signaling its willingness to cooperate with the US and its commitment to fostering a more open and market-friendly economy.
The political nature of the tariff suspension is further supported by the fact that Zimbabwe’s trade relationship with the US is relatively inconsequential in economic terms.
The suspension of tariffs is not a major economic policy shift but rather a symbolic gesture aimed at improving Zimbabwe’s diplomatic standing. By making this move, Zimbabwe may be hoping to build goodwill with the US and, in turn, pave the way for future negotiations regarding the removal of sanctions.
The political implications are also evident in Zimbabwe’s broader foreign policy strategy, which has focused on “re-engagement” with the international community since Mnangagwa took office. This strategy includes efforts to strengthen ties with Western countries, attract foreign investment, and improve Zimbabwe’s image as a stable and business-friendly destination.
While the tariff suspension may serve as a political tool to improve relations with the US, it also raises concerns about the potential economic risks, particularly for Zimbabwe’s local industries. The main worry is that suspending tariffs on US imports could lead to an influx of cheap goods, which may flood the Zimbabwean market and undermine local industries.
Economist, Vince Musewe, is particularly concerned about the potential negative effects of cheap imports on Zimbabwe’s manufacturing sector.
“There is a real risk that the removal of tariffs could lead to an influx of cheaper goods, particularly consumer goods, from the US,” Musewe explains.
“This could undermine local industries that are already struggling to compete, leading to business closures, layoffs, and increased unemployment. Local companies may find it difficult to compete with cheap imported goods, which could stifle domestic production and hinder economic growth.”
Musewe’s concerns are based on the idea that Zimbabwe’s manufacturing sector is already facing significant challenges. High production costs, a lack of access to finance, outdated technology, and unreliable infrastructure have all contributed to the decline of local industries. By allowing cheap imports to enter the market without tariffs, Zimbabwe risks further weakening its industrial base and becoming more dependent on imports.
Furthermore, there is a concern that Zimbabwe’s government may not have the necessary policies in place to mitigate the potential negative impact of this tariff suspension.
If local industries are not supported with the right incentives and policies to upgrade their production capabilities, the tariff suspension could lead to further economic vulnerabilities, rather than creating new opportunities for growth.
Despite these risks, some economists view the tariff suspension as a potential opportunity for Zimbabwe to boost its industrial sector and promote economic growth.
Dr Prosper Chitambara, an economist with a more optimistic view of the policy, argues that the removal of tariffs could provide Zimbabwean businesses with the chance to import capital goods, machinery, and plant equipment from the US at a reduced cost.
“I think the suspension is a positive development, largely. Number one, it’s going to enable Zimbabwean businesses to be able to purchase plant and equipment, capital equipment from the US duty-free,” Chitambara said.
“So I think that’s a major benefit. And so it’s going to help businesses to retool. And it’s also going to help in terms of our re-industrialization or industrialization agenda.”
Dr Chitambara believes that the tariff suspension could help Zimbabwe diversify its industrial base, moving beyond agriculture and raw material exports to manufacturing and higher-value-added goods. This shift could, in turn, help reduce Zimbabwe’s dependency on imports and improve the country’s balance of payments. By strengthening its industrial sector, Zimbabwe could potentially create new jobs, increase exports, and reduce its reliance on foreign aid.
Additionally,Dr Chitambara points out that strengthening ties with the US could lead to increased foreign direct investment (FDI) from US companies. As the world’s largest economy, the US has the financial resources and expertise to invest in a variety of sectors, including infrastructure, agriculture, and manufacturing.
By improving its relationship with the US, Zimbabwe could position itself as an attractive destination for US investors, which would provide a much-needed boost to the economy.
While the suspension of tariffs on US imports may present some opportunities for Zimbabwe’s industrial sector, it is important to recognize that this move alone will not address the country’s broader economic challenges.
Zimbabwe’s economy is grappling with structural problems, including an unstable currency and insufficient infrastructure, among many other problems.
These underlying issues will need to be addressed if Zimbabwe is to achieve sustained economic growth and development.
For Zimbabwe to truly benefit from the tariff suspension and other similar policies, a comprehensive approach is required—one that focuses on not just attracting foreign investment and diversifying trade but also addressing the root causes of economic instability.
This includes implementing effective fiscal and monetary policies, strengthening institutions, improving the business climate, and fostering a skilled workforce.
While the suspension of tariffs on US imports is unlikely to have an immediate transformative effect on Zimbabwe’s economy, it is a strategic move that may help pave the way for improved diplomatic relations and future economic opportunities.
Whether or not this decision leads to long-term economic growth will depend on how well Zimbabwe can address its structural challenges and leverage the opportunities created by this policy shift.
By using this moment to modernise industries, attract investment, and foster stronger international relationships, Zimbabwe could position itself for a brighter economic future.
However, the country must remain vigilant and proactive in ensuring that the risks of cheap imports do not outweigh the potential benefits of this policy.
