Last week, a group of scholars gathered at an event organized by the Ethiopian office of Konrad Adenauer Stiftung (KAS), a German political foundation, to present research on the direct and indirect impacts of US President Donald Trump’s tariff wars on Ethiopia as well as globally.
Since the start of his second term in the White House in January, Trump has adopted a disruptive foreign trade policy that has seen his administration levy tariffs on nearly all US trading partners. Ethiopia was hit with a 10-percent tariff in April.
Washington claims the tariffs are intended to cut down on imports and stimulate the return of American industrialism, but critics argue the indiscriminate application of tariffs could wind up hurting the US economy instead. What the tariffs will mean for countries like Ethiopia is also unclear.
Among the scholars who presented at the KAS event was Etsubdink Sileshi (PhD), an assistant professor of economics at Addis Ababa University. His research focuses on structural changes, external trade balances in Africa, and fiscal performance and determinants of growth in Ethiopia, among other subjects.
Following his presentation of a paper on the impacts of Trump’s tariffs, Etsubdink sat down with The Reporter’s Ashenafi Endale to share his expertise on a range of timely topics, including Ethiopia’s international trade performance since the currency was floated a year ago, the government’s economic reform efforts, and the feasibility of alternative trade blocs like the African Continental Free Trade Agreement (AfCFTA). EXCERPTS:
The Reporter: Since the Trump administration came into office, there has been a rise in US trade tariffs and protectionist policies. These tariffs appear to be part of a broader global trend. What kind of impact have these measures had, specifically on Ethiopia?
Etsubdink Sileshi (PhD): It’s true that these tariffs reflect global tendencies that challenge the direction globalization was heading. What we’re seeing now is a resurgence of protectionism and economic nationalism. This shift carries both short-term and long-term implications for countries like Ethiopia, and we must critically assess both the benefits and the drawbacks.
As part of the global economy, Ethiopia is not immune to the ripple effects of such measures. Studies have already shown the negative economic consequences of tariffs, which are essentially designed to limit the free movement of goods across borders. The goal is to make imports more expensive, thereby giving domestic products a competitive edge. But this also disrupts the principle of open market competition and can shrink export opportunities for countries like ours.
For Ethiopia, the uncertainty surrounding the global demand for raw materials and the investment climate can be felt. Border-shifting global supply chains will directly affect us. Under the Trump administration, for instance, tariffs of up to 10 percent were imposed specifically on Ethiopia. Prior to that, African countries had enjoyed preferential access to the US market for certain products—textiles, for example—but that window has narrowed over the past three years.
Even AGOA, the African Growth and Opportunity Act, which the US introduced in 2000 to promote trade with Africa, is under threat of termination.
As we assess the current impact on Ethiopia, it’s not just about the tariffs we face. We also need to look at the tariffs being levied on our competitors—countries like Brazil, Colombia, and Uganda, for example, in the coffee sector. Understanding how our competitors are affected helps us evaluate whether we have any real advantage, in terms of either quality or tariff structures.
Even if Ethiopia enjoys slightly lower tariffs, if our products don’t meet quality standards, then we’re not truly competitive. So the picture isn’t straightforward. We face a multi-layered challenge.
In summary, there are three levels of impact to consider. First, as a part of the global economy, we are inevitably affected by international trade decisions. Second, Ethiopia is directly targeted by higher tariffs. And third, our key customers—such as companies that source raw materials from Ethiopia, manufacture in China, and export to the US—are also impacted. If the US market closes its doors to those finished goods, demand for our raw materials will fall too.
Could you please expand on the indirect effects?
It affects us in many ways—including indirectly. For example, it can influence investment, either increasing or reducing it. Let’s say a company sets up operations inside an industrial park in Ethiopia with plans to produce garments and export them. Given the current situation, it may now reconsider and halt its plans. It’s not that it can’t operate, but it will reassess its options—should I go to Vietnam or stay in Ethiopia? For instance, the tariff imposed on Vietnam is 46 percent while Ethiopia’s is only 10 percent. So the company might decide Ethiopia has the advantage. But, even if Ethiopia’s tariff is lower, once you factor in transportation and logistics costs, Vietnam may still come out ahead. That’s where it might shift. The issue touches Ethiopia on many fronts. At this moment, we cannot fully map out all the implications—but the impact can be turned into a positive one if managed well.
What about comparisons of Ethiopia’s major export commodities? Are the US tariffs lower on Ethiopian products? Would you characterize the tariffs as burdensome or rather favorable?
When it comes to textiles, the countries that primarily compete with Ethiopia are Bangladesh and Vietnam. Among the goods we export to the US, textiles and apparel are a significant portion. The tariff the US imposes on Ethiopia is actually lower than what it imposes on these countries. For example, Bangladesh faces tariffs as high as 35 percent, while Vietnam faces up to 46 percent.
So, if we can produce at a quality level comparable to these countries, we must also offer competitive pricing. Ethiopia has to compete in the US market. To give you a clearer picture: for every dollar’s worth of goods, Vietnam pays about 46 cents in tariffs, whereas Ethiopia pays only 10 cents. That gives us a clear advantage.
The same applies to coffee. Some Ethiopian coffee varieties—such as Yirgacheffe and Sidama—are widely known. In that space, there are companies that have already built unique brand identities. Once you have an established name, even if prices rise, customers won’t easily walk away. They’re loyal to your product, and there’s an emotional connection. That kind of brand strength gives you a near-monopoly presence in those specific market segments.
In this post-globalization era, many countries used to claim their economy was liberal and open. But now, under President Trump’s administration, we are witnessing growing protectionism. Can we say that the world is shifting back toward protectionism? Is this what the US approach is signaling?
I think this is a very important question. After the Second World War, the institutions known as the Bretton Woods system were established, forming what is often referred to as the ‘rule of order.’ Most countries played within that framework. What does that mean? It means that no one makes decisions in isolation. The Bretton Woods institutions brought together many countries under global frameworks. When it came to trade and tariffs, if one country imposed a certain tariff, another could respond with a countermeasure. But now, what’s happening is that decisions are being made unilaterally without consultation.
Even within countries, there is no single unified political stance. For instance, Trump imposed tariffs, but Biden didn’t necessarily do the same. And when issues are taken to Congress, there are those who support and those who oppose them. So, on the one hand, there is a trend of reverting backward. On the other hand, formerly poor countries are becoming wealthier and competing with others.
We don’t yet know which way things will ultimately go. But one thing is certain—the world will not return to its old, neatly divided order. That’s a strong likelihood. However, it is possible that the rules of the game will be rewritten—to be more inclusive of all voices, interests, and capacities. Alternatively, the world might move in one direction where countries retaliate against one another with escalating tariffs, in a tit-for-tat cycle. That too is a possibility. So, it’s hard to tell where exactly this is headed.
How do you view the use of tariffs as a weapon, an instrument, or a grassroots tool to advance political and diplomatic interests? How far can this approach go? Additionally, can such a strategy push developing countries to seek alternative partnerships, such as with BRICS or others?
As you rightly put it, tariffs can indeed be used as a diplomatic tool. Today, we see economic diplomacy being practiced in a positive way—that is, one country uses market access to build friendly relations with another. But on the flip side, it can also be used coercively: ‘If you don’t do this, we’ll impose tariffs,’ or, ‘If you do that, we’ll reduce them.’ Especially if a market is large and highly attractive, it can be used as leverage.
In fact, using tariffs isn’t new. It’s a practice states and governments have employed for a long time. Historically, tariffs were even used as a kind of protection during travel, to ensure safety from theft and secure trade routes. Governments have always used them in relation to trade. Trade routes had to be protected and expanded, and those involved in safeguarding them left some records to that effect and also entailing that even the beginning of governments establishment is also rooted in trade and protection.
Tariffs have existed for centuries. Sometimes, they can be imposed at rates of four or five percent or higher. When one country imposes tariffs, the other might retaliate in kind. That’s called reciprocity.
On the other hand, if your factories and industries are underdeveloped, and powerful corporations from abroad enter your market unchecked, there’s the infant industry argument—which calls for tariff protection to help young industries grow. Developing countries, in particular, often need protection from corporations of large industrialized nations. Otherwise, those corporations may bring in their products at unfairly low prices—dumping them into local markets and forcing domestic industries to shut down, even the ones that have been around for some time.
Beyond that, as you mentioned, tariffs can also be used as a political tool. We’re currently seeing examples where, if a country expresses unfavorable sentiment, tariffs ranging from 10 percentile to 50 percentile are suddenly imposed. This shows that diplomacy is clearly at work.
What about alternatives?
As I’ve explained, there are different approaches—and of course, alternatives are always considered. Take the European Union, for example. I believe about 30 percent of their exports to the US are now subject to tariffs. So yes, there can be diversification. If access to the US market becomes unviable, countries may turn to China or explore other avenues. They might even try to negotiate.
There are also voices advocating for institutions to accommodate all these dynamics. So, it’s not a dead end—if one route closes, alternatives can and will be utilized. It doesn’t always have to be the West. For example, the US and Canada are neighbors; they’re in ongoing talks and might reach agreements. But if that doesn’t happen, Canada will likely reach bilateral deals with others offering viable options.
A recent example: this very week, Japan and the US reached an agreement. Japanese investors are expanding in the US, and on the other side, the US reduced tariffs on Japanese products from 25 percent to 15 percent.
So, it’s not necessarily about abandoning existing trade blocs entirely and jumping ship to new ones like BRICS. What we’re seeing is that countries are increasingly pursuing dual strategies—engaging with both traditional and emerging alliances simultaneously. They’re trying to make the most of all options, rather than sticking to one rigid model.
Specifically for Ethiopia, could the African Continental Free Trade Area (AfCFTA) possibly be an alternative, considering that it is not yet fully operational? How do you see its potential?
The objective behind the launch of AfCFTA is quite commendable. The aim is to eliminate trade barriers among African countries. This could be related to tariff issues, but it could also go beyond tariffs—such as addressing legal frameworks. Its implementation is still slow. It may become more operational by 2030, or even by 2040, it might possibly take as far as 2063 to get there.
The problem is this: unlike other regions, Africa doesn’t have natural borderless flow. In Europe, for example, countries are closely connected. Rivers run through multiple countries; large ships can navigate through them; goods can be transported efficiently. Trade happens with large shipments, meaning it relies on infrastructure that supports bulk movement—whether by rail or by sea. Air transport is expensive.
Africa is a vast landmass, and it requires fundamental infrastructure development—either for land routes or maritime transport. That’s the first bottleneck: the lack of foundational infrastructure.
The second challenge is that many African countries don’t have a strong tradition of producing goods other than those based on their comparative natural advantage. For instance, we grow coffee, and so does another country. Of course, there might be a difference in taste profiles, and based on that, we might still import theirs—just like the Germans and Japanese trade cars with one other due to brand-based differentiation. As African countries grow and evolve, their products will become more distinct and the added value will also differentiate.
So Ethiopia could have trade potential with South Africa, Kenya with Nigeria, and so on. We must assess: what can we export to them, and what can they send us in return? Differentiation is necessary.
We definitely need to evaluate this area. We’ve been told for a long time that intra-African trade is low because many African countries produce similar goods. That makes it hard to engage in exchange.
I think the starting point should be recognizing this issue. Then, we need to develop infrastructure, improve product quality, and build public trust in African-made goods. Sometimes people prefer a T-shirt made in Europe over one made in Ethiopia, just because of perceived quality. That has to change.
So it’s about building a manufacturing base, improving product quality, and moving from an economy based on natural resources to one rooted in industrial productivity. That way, the goods we exchange will increase and diversify.
Can the tariff pressure introduced by the current Trump administration make AfCFTA a viable alternative?
I wouldn’t go so far as to say AfCFTA can be an alternative to the tariff pressure brought on by President Trump’s administration. But it can serve as a source of hope. It can also be used as leverage—by gradually substituting imported goods with continental production, if countries commit to it seriously.
What does that mean? First, it could encourage countries to abandon bilateral trade agreements and commit to ratifying the free trade area agreement. Then, it could attract foreign companies and facilitate the transfer of their wealth into African economies. For instance, Dangote is about to open an additional factory here. That shows that AfCFTA can also encourage investment within Africa.
Whether it’s Swiss banks—or those from Singapore or Malaysia—any other viable options should be reached out to, encouraging them to establish economic relations. By creating job opportunities and generating value-added production, if AfCFTA manages to bring about integrated development across Africa, it could provide breathing room in the face of unfair external trade pressures like the ones we’re currently experiencing. That’s how I see it.
In diplomatic endeavours, the Ethiopian government has consistently expressed its intentions to shift from aid to trade. Do you think the current use of tariffs as a diplomatic tool undermines these ambitions?
There has been a persistent debate on whether aid truly helps nations or not. Some countries have benefited from it; others haven’t. The impact of aid depends both on the intent of the donor and the capacity and will of the recipient to use it effectively. For instance, Europe rose after the war. So did the Koreans and Japanese—with external assistance, yes, but also with strict discipline. So, the decisive point is not the donor but what the recipient does with the aid. That’s the core issue.
Now, the idea of economic diplomacy that puts trade at the center instead of aid is not only valid—it’s visionary. It’s also practical. But tariffs being utilised in the way we have been discussing earlier—could it backfire? That’s debatable. We need to ask: What is the purpose of a tariff? A tariff hurts the targeted country. In the trade relationship between Ethiopia and the US, the trade balance actually favors the US. As of 2024, trade between the two countries reached slightly more than one billion dollars. Most of that is imports into Ethiopia from the US—particularly by Ethiopian Airlines, as well as other goods including machinery and medical equipment. So, the majority of trade is flowing from them to us. The balance benefits the US, and this should be pointed out.
In light of this, Ethiopia needs to clearly identify the specific products we export to the US and advocate for targeted tariff reductions. At the same time, we should communicate that high tariffs on other countries mean doing business with Ethiopia could be more advantageous. In that sense, a 10 percent tariff is not necessarily bad—it can be used strategically.
Ethiopia was excluded from AGOA primarily due to human rights violations. What do you see now as the reason behind the 10 percent tariff? Is it because Ethiopia is a BRICS member, or is there another factor?
Regarding AGOA, the whole initiative is set to expire in 2025. After that, it will be up to the US Congress to decide whether or not to renew it. However, when we look at the current tariff landscape, the chances of the imposed tariff being extended for a longer period seem very slim.
As for the current 10 percent tariff, multiple explanations are being offered. One of them, frankly, is just ‘common sense.’ I’ve listened to interviews where people say it’s a matter of common sense—but what they really mean is: ‘We don’t particularly like these countries.’ It’s not based on specific numbers or data; it’s more of a sentiment—like asking, ‘Do we like them or don’t we like them?’
Another reason is the tariff we are applying on goods we import from the US, and the assumption is that the current rate imposed might be estimated based on that. Also, the issue of trade surplus—or lack thereof—comes up. Ethiopia doesn’t have a trade surplus with the US. In fact, we generally run a trade deficit, so punitive measures like tariffs wouldn’t really have weighed that much in this regard.
What has made a difference, I think, is that US products entering Ethiopia are not exempt from tariffs. We can’t always pinpoint how much tariff is applied to which product, but we can speak in averages. Overall, what we’re seeing is what’s called a ‘reciprocal response.’ The 10 percent is not a strict, mandatory rate—it’s more of a retaliatory measure. But even that percentage seems arbitrary; it doesn’t appear to be part of a clearly defined trade policy.
In essence, the current tariff levels appear to be emotionally driven, not based on structured economic analysis.
Foreign investors, including those from China, used to come into Ethiopia due to the benefits of FDI—primarily the opportunities presented by AGOA. Cheap labor is also a major consideration. Do you think the current 10 percent tariff could drive some of these investors away? Could it affect FDI levels?
At the beginning of our discussion, we talked about indirect impacts—and this is one of them. Tariffs can both attract and reduce FDI. For instance, a Chinese company operating in Ethiopia in the garment sector might reconsider and shift to Vietnam instead. Indeed, for companies that initially came because of AGOA, this new tariff narrows their profit margins.
When profit margins shrink, governments can support investors by reducing operating costs through policy tools—not only by providing basic infrastructure but also by lowering electricity and other input costs. They can offer electricity incentives. Given the current expansion of our hydroelectric capacity, our infrastructure is improving. That enables companies to access cost reductions and remain competitive globally, as opposed to relocating to countries we often refer to as low-cost destinations.
So, it’s not merely about the 10 percent tariff itself. It calls for deliberate domestic action. With the right support, the blow can be cushioned. But we must also acknowledge that such developments have real-world consequences. Sometimes, they require a well-calibrated econo-diplomatic response.
These investors attend global business fairs in various countries. They need to hear consistent and persuasive messaging. We, too, need to market ourselves more effectively. Ethiopia’s labor, compared to others, is not that expensive. But if investors are paying significantly more elsewhere, they may shift.
Investment is often a matter of perception. There are no guarantees. What matters is projecting confidence.
