President Donald Trump has withdrawn benefits for Rwanda to export apparel duty-free to the US under the African Growth and Opportunity Act (Agoa).
In March, the Trump administration had threatened to review Kigali’s status in 60 days after the latter banned importation of used clothes and shoes.
“The President, therefore, has decided to suspend Rwanda’s duty-free access to the United States for apparel products until Rwanda comes back into compliance with Agoa’s eligibility requirements,” the deputy US Trade Representative CJ Mahoney said in a statement on Monday.
“We regret this outcome and hope it is temporary.
“If the Agoa eligibility criteria are to have any meaning, they have to be enforced-particularly where, as here, other Agoa members took action in order remain in compliance," he said adding that Trump’s action was "measured and proportional”.
Rwanda, Kenya, Tanzania and Uganda increased tariffs on imported used clothes in 2016 with the aim of boosting their local textile industries and eventually phasing out second-hand apparel.
But Kenya, Tanzania and Uganda abandoned the joint position after threats by the US to review their Agoa status.
Mr Mahoney said the exclusion from Agoa would affect about three per cent of Rwanda's total exports to the US, which totalled to $1.5 million last year.
Despite the suspension, Rwanda will remain eligible to receive non-apparel benefits under Agoa.
Contacted for comment by The EastAfrican, Rwanda’s Minister of Trade and Industry Vincent Munyeshaka said the government expected the Trump government to implement the suspension soon after the 60 days lapsed.
Rwandan apparel exports to the US will now attract tariffs as high as 30 per cent, Assistant US Trade Representative for Africa Connie Hamilton said earlier this month.
To cushion its exporters under Agoa-facilitated contracts, Rwanda is setting up a Rwf1.3 billion ($1.5 million) facility to absorb tax expenses for traders with ongoing contract obligations.
The two-year facility, which is waiting cabinet approval, is intended to ease the transition as exporters search for markets in Europe and Asia.
Kigali plans to expand the facility into a revolving fund that will cushion local industries against external shocks.
Rosa Whitaker, a former Assistant US Trade Representative, said she was disappointed by the Trump decision.
“It comes across as arrogant, it comes across as bullying, and we are further ceding Africa to China,” she said.