Trump Orders Tarrifs Countering VAT Taxes Of Kenya & Other Countries

Kenya could be hit by fresh sanctions by United States President Donald Trump after he warned of new tariffs on countries that charge Value Added Tax (VAT), including Kenya.

In a move that could shake the country's economic standing, Trump through a post on X instructed the Secretary of State, Secretary of Commerce, Secretary of the Treasury, and the United States Trade Representative (USTR) to explore and implement tariffs on countries that impose a Value Added Tax (VAT) on goods entering the U.S., arguing that the VAT system creates an unfair disadvantage for American imports.

"On Trade, I have decided, for purposes of Fairness, that I will charge a RECIPROCAL Tariff meaning, whatever Countries charge the United States of America, we will charge them - No more, no less!" he stated.

"For purposes of this United States Policy, we will consider Countries that use the VAT System, which is far more punitive than a Tariff, to be similar to that of a Tariff. Sending merchandise, product, or anything by any other name through another Country, for purposes of unfairly harming America, will not be accepted."

Kenya imposes a standard 16 percent VAT on imports from countries like the US, while exports to these nations are zero-rated.

As a result, imported goods from foreign countries are more expensive in the local market, making consumers more likely to opt for cheaper alternatives from other countries. This, in turn, impacts revenue inflows to foreign nations such as the United States.

Kenya has significantly benefited from the African Growth Opportunity Act (AGOA), particularly in the textiles and apparel sector. Since its introduction in 2000, Kenya has exported $6.5 billion (Ksh840 billion) worth of garments to the U.S. duty-free. It remains the leading garment exporter under AGOA, surpassing Lesotho, which ranks second, and outperforming both Mauritius and Madagascar in U.S. exports.

Furthermore, Kenya has exported $577 million (Ksh 74.5B) worth of nuts duty-free to the U.S. under AGOA since 2000, demonstrating the substantial advantages of the program.

If sanctions are imposed, production costs would rise, potentially leading to job losses, reduced exports, and declining revenues, affecting many Kenyans.

Trump argued that a tariff system would be more advantageous for the U.S. compared to the VAT system. This reasoning likely comes from the fact that tariffs on imports offer stronger protection for domestic industries, boosting their revenues. Additionally, tariffs serve as a direct source of government income.

More importantly, tariffs act as a powerful trade policy tool that can be strategically used to regulate imports, support key industries, or respond to trade disputes. Trump alluded to this in his statement, emphasizing that the tariffs would be applied in a way that benefits both parties.

"It is fair to all, no other Country can complain and, in some cases, if a Country feels that the United States would be getting too high a Tariff, all they have to do is reduce or terminate their Tariff against us. There are no Tariffs if you manufacture or build your product in the United States," he added.

"For many years, the U.S. has been treated unfairly by other Countries, both friend and foe. This System will immediately bring Fairness and Prosperity back into the previously complex and unfair System of Trade. America has helped many Countries throughout the years, at great financial cost. It is now time that these Countries remember this, and treat us fairly – A LEVEL PLAYING FIELD FOR AMERICAN WORKERS."