The Central Bank of Kenya (CBK) Governor Kamau Thugge has downplayed the potential impact of the proposed 10 percent tariff hike on Kenyan exports to the United States, stating that it is “unlikely to affect the economy.”
Thugge specified that “Kenya exports goods worth approximately $650 million to the US annually, and even in an extreme scenario, the country could lose about $100 million in export earnings due to the tariff increase.”
During the post-MPC meeting on Wednesday, April 9, 2025, Thugge elaborated, “While that’s a notable amount, it remains relatively small compared to our GDP of over $122 billion, and we don’t expect it to significantly affect the balance of payments or the exchange rate.”
He further clarified, “We roughly export $650 million, and in an extreme case, if that does not change, then the 10 per cent could have an impact and reduce our export to the US by $100 million.”
Thugge reiterated his assessment, saying, “The $100 million is relatively small compared to our GDP, and we do not expect that $100 million would have any significant impact on the balance of payment and the exchange rate.”
These remarks come amidst growing concerns regarding Washington’s review of trade preferences under the African Growth and Opportunity Act (AGOA), which has historically granted duty-free access for certain African exports.
Kenya has been a significant beneficiary of AGOA, with major exports to the US market including textiles, apparel, coffee, and tea.
It’s worth noting that in 2024, Kenya’s exports to the United States totaled approximately $737.3 million, reflecting a 17.5% decrease from the preceding year. This contrasts with the 22.81% increase in 2023, where exports were valued at around Ksh 72.96 billion (approximately $611.5 million). The United States remains a key trading partner for Kenya, with exports encompassing apparel, textiles, coffee, and nuts.
Separately, the Monetary Policy Committee (MPC) convened on Tuesday, April 8, 2025, and decided to cut the policy rate by 75 basis points to 10.0%. Additionally, the committee implemented a 75 basis points reduction on the interest rate corridor, narrowing it from ±150 basis points previously.
Furthermore, the applicable interest rate on the Discount Window was adjusted to 10.75%, a decrease of 225 basis points from the previous 300 basis points, aligning it with the upper bound of the revised interest rate corridor.
