Trump’s Harsh Tariff Sparks Fear of Liquidity Crisis in Lesotho
Lesotho is at risk of a liquidity crisis if US President Donald Trump follows through on plans to impose a 50% levy on imports from the tiny southern African mountain kingdom, its trade minister warned.
Trump announced this month he’ll apply tariffs of at least 10% on most goods coming into America, with even higher duties on some 60 nations, to counter trade imbalances. Lesotho was hit with the highest levies on the continent before Trump paused the additional duties for 90 days.
Should the higher tariff regime be implemented, it will place 12 000 direct jobs and 40,000 indirect jobs on the line in Lesotho, erode its foreign reserves and limit its ability to pay for imported electricity and hire construction equipment, Trade Minister Mokhethi Shelile said in an interview with Bloomberg TV on Wednesday.
“We will be terribly affected,” he said. “We are going to have liquidity issues in terms of foreign currency.”
Lesotho would be “comfortable” with the US retaining the 10% levy because its competitors would be equally affected and American consumers would pick up the cost, the minister said.
Negotiations about the tariffs are ongoing, and Lesotho has been asked to make officials available for talks with an American regional director who is scheduled to visit Pretoria in South Africa next week.
“We are scrambling for a solution that can work quite quickly. Normally when these types of things happen, they happen over time, but this is an overnight thing,” Shelile said. “We need more time” and the authorities have requested five years to be able to adjust to the tariff changes, he said.
Lesotho is one of the world’s poorest countries, with more than half of its 2.3 million living below the poverty line, according to World Bank data. The African nation sells diamonds and apparel to the world’s biggest economy, including jeans for brands such as Levi Strauss & Co.
Exports from Lesotho to the US totaled $237.3 million last year — equivalent to about 11% of the nation’s $2.12 billion GDP — while American imports from the country that’s entirely surrounded by South Africa totaled $2.8 million, according to the Office of the US Trade Representative.
“It is very difficult for us to match up with other countries in terms of what we can buy” from the US, the trade minister said. “We have issues of foreign exchange — the US dollar is much stronger — and then we are a least-developed country of 2 million. Those are some of the factors that did not go into the calculations when this was decided by the administration.”
Lesotho this week granted Elon Musk’s satellite-internet service Starlink a 10-year license to operate in its territory, a move the nation’s communications authority said would accelerate its digital transformation, fuel economic growth and foster innovation.
Starlink applied for the license in April last year, and the decision to issue it was unrelated to any discussions about tariffs, according to Shelile.
“We definitely need that technology,” which will help expand internet access across Lesotho’s very mountainous terrain, he said.
