US Tariffs Rock Namibia: Paving the Way for a Radical Economic Transformation

At the end of last week, United States (US) president Donald Trump imposed tariffs on an estimated 180 countries with the aim of bolstering US competitiveness, particularly when it comes to exports.

Namibia has not been spared. It now faces a 21% tariff on its exports to the US.

This development has sent shockwaves through Namibia’s economic landscape, highlighting the perils of over-reliance on a single export market and the importance of diversifying trading partners.​

At first glance, this development might appear straightforward but the US tariff hike has far-reaching implications for our country.

Not only Namibia will be affected, it is set to reduce the volume of goods traded and and have an impact on citizen welfare across the globe

Key Namibian industries, such as diamond exports, building stones, fish, beef, and charcoal, now face a crossroads.

These sectors, which form the backbone of Namibia’s exports to the US, will experience a sharp increase in the cost of doing business.

As a result, American consumers will face higher prices for Namibian products, leading to a likely decline in demand.

This not only affects local Namibian producers but also has the potential to disrupt the entire supply chain – from the miners and farmers through to the exporters.

A WAKE-UP CALL?

Various scholars, economists in particular, have expressed concerns that these tariffs will disrupt trade relationships and introduce significant economic uncertainties globally.​

This situation should serve as a wake-up call for Namibia to focus on local production.

By strengthening manufacturing, Namibia can help reduce its vulnerability to such external shocks.

Local production offers several advantages because it allows for better quality control as producers can closely monitor the manufacturing process.

This means that shorter supply chains lead to faster turnaround times, enabling businesses to respond quickly to market demands.

Moreover, it stimulates the local economy by creating jobs and keeping the skilled labour force within the country.

For instance, if Namib​ia invests in local beef processing plants, it can add value to its raw beef exports, reduce dependence on foreign processing facilities and create employment opportunities at home.​

OTHER OPTIONS

In addition to local production, Namibia should look towards new trading partners like the South-South Cooperation (developing countries in the Global South), which presents a viable option.

We could deepen our trade relations with other African countries through the African Continental Free Trade Area (AfCFTA).

This agreement has the potential to create a large market for Namibian goods, from agricultural products like beef and fish to minerals such as diamonds. Another promising avenue is the Belt and Road Initiative (BRI).

China, the driving force behind the BRI, has a growing appetite for natural resources and consumer goods.

Namibia could export its uranium and other minerals to China in exchange for Chinese-made machinery and consumer products, thus diversifying its trade portfolio.​

The tariff the US has imposed on Namibia is a significant setback but also an opportunity for change.

By emphasising local production and exploring new trading partnerships, Namibia can build a more resilient and diversified economy, better equipped to weather the storms of international trade disputes.​

INCENTIVES

The government could strengthen local production by offering incentives to local entrepreneurs – which should apply in both treatment regions and non-treatment regions from a special economic zones perspective.

Tax breaks for new manufacturing start-ups in key sectors, such as value-added processing of minerals and agricultural products, would encourage investment. Moreover, investing in research and development (R&D) cannot be overemphasised.

Namibia can allocate a portion of its national budget to support R&D in agriculture, and aim to develop drought-resistant crop varieties or more efficient fishing techniques.

This would enhance the productivity of local producers, making them more competitive both locally and in international markets outside of the US.​

DECISIVE STEPS

In the realm of new trading partnerships, Namibia needs to actively engage with the AfCFTA.

Participating in regional trade fairs and business forums organised under the AfCFTA umbrella would provide Namibian businesses with exposure to potential African customers.

For instance, Namibian beef exporters could showcase their high-quality products at an AfCFTA-sponsored food and agriculture trade fair in Nairobi, Kenya.

This would not only increase sales opportunities but also build brand recognition across the continent.​

Regarding the BRI, Namibia should work on improving its infrastructure to better facilitate trade with potential trading partners in the Global South.

Upgrading ports like Walvis Bay to handle larger vessels would enable more efficient export of minerals and import of goods.

In addition, establishing special economic zones near border areas with neighbouring countries could attract investment in manufacturing, taking advantage of Namibia’s strategic location and natural resources.​

In light of the daunting obstacle of US tariffs, Namibia has the potential to transform this adversity into an opportunity for long-term economic growth.

By taking decisive steps in local production and forging new trade alliances, Namibia can chart a more stable and prosperous economic future.

• Peya Mushelenga is a national development adviser: National Planning Commission, and a master of public administration; he holds an MBA and a number of economics degrees from the University of Namibia and the Namibian University of Science and Technology. The views expressed here are entirely his own.

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