By Pavan Kulkarni, Peoples Dispatch
NEW DELHI | 14 April 2025 (IDN) —Slapped with the highest tariff rate imposed by the Trump administration on countries across the globe on April 2, the small southern African kingdom of Lesotho, with a population of just above 2 million, finds itself in dire straits.
Fears abound that the 50% tariff imposed on this poor, mountainous country, landlocked by South Africa, may sound the death knell of its largest private sector employer – the textile industry – which exports 75% of its output to the US.
35,000 workers, predominantly women, are employed in this sector, which yields about 20% of Lesotho’s GDP. About 12,000 of them, working in large factories producing denim for the jeans labeled by American brands, like Levi’s and Wrangler, are at immediate risk of losing their jobs.
No other industries are developed on a large enough scale to absorb them in Lesotho’s underdeveloped, largely rural economy, with an unemployment rate as high as 25%, Solong Senohe, the General Secretary of the United Textiles Employees (UNITE) told Peoples Dispatch.
Neither can they earn a living off the land as peasants in the highly distressed agrarian economy. “Unfortunately, they will have to join the large numbers of people migrating from Lesotho to South Africa” to eke out a living “as sex slaves, domestic workers and illegal miners,” laments Senohe.
Trump’s tariff calculations are “idiotic”, “nonsensical”, and “arbitrary”, say economists
The Trump administration maintains that the tariffs it has imposed are “reciprocal”, charging only half of what Lesotho has imposed on American goods. Using a method economists have described as “idiotic”, “complete nonsense”, “random and arbitrary”, etc, it calculated that Lesotho is charging a tariff rate of almost 99%.
To arrive at this figure, the US administration simply divided its trade deficit with Lesotho last year by the total value of the goods imported from it.
In 2024, the US imported from Lesotho USD 237.3 million worth of goods, mainly denim and diamonds, while its exports were worth only USD 2.8 million. Subtracting US imports from its exports provides for a trade deficit of USD 234.5 million.
Dividing this deficit by the value of US imports from the country last year, Washington claims that Lesotho is charging almost 99% tariffs on US goods.
This tariff calculation by the US administration “is not based on facts,” said Lesotho’s Trade Minister Mokhethi Shelile. Neither Trump, who mocked Lesotho last month as a country “nobody has ever heard of”, nor his minions laughing at this insult, appear keen on understanding the factual reality.
Nevertheless, the facts are self-evident. The massive difference between US imports and exports to Lesotho is not due to Lesotho’s tariffs on American goods. It is rather because Lesotho’s GDP of just USD 2 billion, yielding a per capita annual income of less than a thousand dollars, does not leave much spare money in its economy to import American goods.
The World Bank estimates that 36% of its population of 2.3 million earn less than USD 2.15 a day. “A full 67% of the population is considered poor,” according to Bertelsmann Stiftung’s Transformation Index (BTI) 2024.
Penalized for producing American goods while being unable to afford them
This poverty, driven in large part by the unemployment of almost a quarter of its working-age population, has ensured the availability of very cheap labor. The US companies have enthusiastically exploited this to produce jeans cheaply for their own market, especially after the African Growth and Opportunity Act (AGOA) 2000 provided duty-free access to US markets for products from selected sub-Saharan countries.
However, the workers manufacturing these US-destined jeans in Lesotho’s factories cannot afford to buy a single pair, earning only USD 150 a month, Senohe said. This inability of some of the world’s poorest people to purchase American products while producing them is effectively what Trump described as the US being “treated badly”.
Retaliating against this imagined mistreatment, he has imposed the highest tariff rate of 50% on this poor country.
While Trump declared April 2, when he announced the tariffs, as “Liberation Day”, Teboho Kobeli, who employs about 2,000 workers in Lesotho, told the BBC, “This has been a devastating day for us.”
He is the founder of Afri-Expo Textiles, one of the few domestic enterprises in the industry mainly dominated by foreign investors. Although not catering exclusively to American brands, 10% of its produce was being sold in the American market.
“We have been going up and down, meeting different stakeholders, government officials, ministers, [and holding] meetings [amongst] ourselves as industrialists,” he said, adding that the government has assured them its support.
However, the government has not provided a similar assurance to the workers. “We have asked for a meeting with the Department of Trade and Industry, but to no avail,” said the union’s leader, Senohe. Nevertheless, “We have been engaging with the company’s owners since the Trump administration made this announcement. We are also approaching the American embassy together,” he added.
Lesotho illustrates the perils of reliance on exports to the US without developing a domestic market
“We just have to speak to the US administration,” said Trade Minister Shelile. “We are a small economy… we are concerned about the possible closure of textile factories.”
While trying to increase “export to alternative markets such as the European Union and the Africa free continental trade area” in the medium term, the government is immediately “assembling a high-level delegation to the United States to try to maintain the current market dispensation.” He added.
“We are looking at other markets in Africa, Europe [and] elsewhere, but we can’t just shelf the US market,” maintains Kobeli. “We need to do everything we can to bring back that market.”
In the immediate term, the government will have to negotiate with the US to secure a reversal of this tariff to prevent the destruction of this industry, Senohe also admits. But he blames the failure of government policy for the vulnerable state the industry is in.
The union has been pressing successive governments to develop an industrial policy prioritizing the diversification of its textile market to other African countries, but none paid heed.
Shaped by AGOA, Lesotho’s textile factories produce cheaply for the US market, even as the cheaper clothes worn domestically are imported, he explained, stressing the imperative not only to diversify but also to “localize” by catering to and developing the domestic market.
Lesotho, like many other countries of the Global South reeling under the impact of US tariffs, illustrates the perils of an industrial policy dependent on foreign markets without prioritizing the development of the domestic market. [IDN-InDepthNews]
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Image: Textile workers in Lesotho. Credit: LNDC
