🌍 Egypt announces textile cities, tariff tension continues

Hi Operator,

Let’s get the obvious out of the way first:

• Yes, Trump paused his tariff plan by 90 days (for all but China), because according to him people were getting ‘afraid‘, but the baseline 10% that applies to everyone still holds.

• It’s clear the equation used to work out tariffs for each country doesn’t actually rely on the tariff percentage the US (mostly falsely) states that a country has imposed on them — it’s got a lot more to do with closing gaps in trade deficits (how much the US spends with you vs how much you spend with the US), and even then, the math is alarmingly unsound. The pause could be an excuse to recalculate.

• After saying he couldn’t imagine going higher than 125%, he announced yesterday that the US import tariff for China is going up to 245%.

Anyway.

AGOA was not the only trade deal to fall apart in the last few weeks of a global economic meltdown triggered by the USA turning their global economic policies upside down. Australia & South Korea lost out too. It made me think about what countries and their governments are looking for in trade partners.

I’m sure its easier (and obviously wise) to seek out deals with the largest economies — one negotiation, endless opportunities for various businesses. But as the world is pushed into trade diversification work that many countries should probably have prioritised a long time ago, they are learning what the whole fashion value chain learned during the COVID-19 lockdowns: All your eggs in one basket can tie your hands completely.

Yes, economies closer in size to Nigeria or South Africa (or Australia or South Korea) have less demand to offer than a trade partner like China or the USA (and less overall disposable income — important for fashion). But these same economies have lower supply volumes that mirror each other closely. What if you could still sell your country’s whole supply of an industry’s goods with a few like-for-like trade partners, without the intimidating power dynamic?

I think enough countries will be pushed into trying this in 2025 that we’ll find out, no matter which way the US tariff situation goes next, because what’s happened so far has introduced enough uncertainty into the global market that long-term resilience plans will need updates. This is not a scenario anyone saw happening (not even the business owners who voted for him and are now in distress), and it changes the rules for managing risk.

There are obviously lots of variable factors – how most other countries don’t shop at the volume and speed of the typical American consumer, how sharper cultural nuances that are more country specific and less reflective of the West’s influence on global culture may shape demand differently, how dealing in currencies of similar buying power changes profit strategies based on charging in USD and spending in local.

All things considered, some will survive this change. I’m working on figuring out who and why.

With thanks,
Modupe Oloruntoba

In more inspiring news, here’s the all Africa panel at BoF’s Crossroads 2025 event, a great watch for this weekend.

That’s all for today — thoughts?

With thanks,
Modupe