Business

A Challenge and Opportunity for Uganda

Early reports indicate that U.S. buyers have begun pausing orders or demanding price reductions, with spot market prices dropping by 3% to 5% since the tariff was introduced.

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Trump’s Tariffs to Ugandans

On April 2, 2025, U.S. President Donald Trump announced his “Liberation Day” tariffs, imposing a 10% levy on all imports effective April 5, with higher “reciprocal tariffs” set to take effect on April 9. For Uganda, a nation already excluded from the African Growth and Opportunity Act (AGOA) since January 2024, this policy threatens its modest $77 million trade with the U.S. However, as the American market contracts, new opportunities may emerge elsewhere, allowing Uganda to diversify its $2.5 billion export economy.

Uganda’s exports to the U.S., primarily coffee (which generated $58.2 million in 2023), vanilla, and fish, are now subjected to the 10% tariff, increasing costs for American buyers. Coffee, the backbone of Uganda’s economy and a vital source of income for 1.5 million smallholder farmers, is feeling the pressure. Early reports indicate that U.S. buyers have begun pausing orders or demanding price reductions, with spot market prices dropping by 3% to 5% since the tariff was introduced. The Uganda Coffee Development Authority (UCDA) estimates a potential revenue decline of 5% to 10% if demand falters, which could negatively impact rural livelihoods.

In addition to coffee, the tariffs further complicate Uganda’s exclusion from AGOA, extinguishing hopes of regaining duty-free access before the program expires in September 2025. The Ugandan shilling, which had already fallen by 5% in 2024, may face additional pressure, potentially dropping by another 2% to 3% by mid-2025. This situation could exacerbate inflation (currently at 3.2%) and increase the cost of servicing $11 billion in external debt, a bitter challenge for a nation still recovering from global economic shocks.

However, adversity can also create opportunities. With the U.S. market becoming less viable, Uganda’s exporters and policymakers are looking to alternatives, capitalizing on the uneven impact of the tariffs globally (10% for Uganda compared to 46% for Vietnam or 50% for Lesotho) to pursue untapped markets.

China is emerging as a strong contender. Offering zero-tariff access to 98% of Ugandan goods, Chinese imports of Ugandan coffee grew by 20% in 2024, reaching $12 million. As U.S. demand fluctuates, Chinese buyers motivated by a 15% annual increase in coffee consumption could increase their purchases of robusta beans, especially following a $200 million loan for storage infrastructure signed in March 2025. Local traders have noted this shift, viewing China as a potential lifeline.

The European Union, Uganda’s $400 million trade partner, presents another opportunity. Under the Everything But Arms initiative, Ugandan coffee and vanilla can enter duty-free, unaffected by Trump’s tariffs. European roasters, facing their own 20% U.S. tariff starting April 9, may seek to source from Uganda to mitigate supply chain disruptions. Exporters in Kampala reported a surge in inquiries from the EU on April 4, signaling a possible windfall.

Regionally, the African Continental Free Trade Area (AfCFTA) offers tariff-free access to 1.4 billion consumers. Uganda’s $600 million in intra-African trade, primarily with Kenya and South Sudan, could expand, with coffee, maize, and processed goods like roasted blends finding local buyers. The trade ministry’s commitment to fast-track AfCFTA integration, announced on April 5, demonstrates intent, although challenges like inadequate infrastructure remain.

The Middle East, especially the UAE, also presents niche opportunities. Uganda’s coffee exports to the Gulf reached $50 million in 2023, and its robusta beans are well-suited to regional blends. A Dubai trade fair in March 2025 showcased Ugandan firms, a trend likely to gain momentum after the tariffs take effect. India, with its 1.4 billion coffee drinkers, is another potential market, although barriers to trade there are significant.

These opportunities do come with risks and challenges. Redirecting trade can take months or years, while the impacts of U.S. losses are immediate. Logistics bottlenecks, such as poor road conditions and border delays, could hinder progress, and a global trade war ignited by Trump’s policies could shrink other markets. Additionally, Uganda’s domestic response will be critical. The tariffs reveal internal weaknesses that require swift government action. Infrastructure improvements, such as the $200 million Chinese-funded coffee storage facility or overdue AfCFTA road projects, are essential to meet EU standards and fulfill African delivery timelines, as poor logistics inflate costs by 20%, according to 2024 World Bank data. Investing in value-added processing, such as coffee roasting or vanilla extraction, could significantly increase export values from $2 per kilogram to $10 or more, creating jobs and offsetting losses, albeit funding remains a challenge. Fiscal adjustments may see the Bank of Uganda tighten rates to curb inflation, while small and medium enterprises responsible for 80% of exports require credit and training to access new markets, a sentiment echoed by a Jinja vanilla SME on April 5.

The government is active in negotiating with China, promoting AfCFTA, and seeking opportunities at Gulf expos, such as the UAE’s $2 billion trade event scheduled for June 2025. For Ugandan exporters, adaptability is essential. A coffee cooperative in Kampala stated on April 6 that it is already targeting EU and Middle Eastern buyers, aiming to make the most of the tariff gap. If successful, this pivot could reduce reliance on the U.S., which currently accounts for just 3% of Uganda’s exports, and strengthen its economy.

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