Lifting tariffs on US imports may lower costs

Zimbabwean consumers can anticipate lower prices, as businesses importing American capital goods and technology stand to benefit from reduced operational expenses following the Government’s decision to remove tariffs on products from the United States, according to an analysis by the National Competitiveness Commission (NCC), the State-owned economic body.

The removal of all tariffs on products originating from the US followed the recent imposition of an 18 percent reciprocal tariff by the United States on Zimbabwean exports.

Prior to the suspension, Zimbabwe had maintained a 35 percent tariff on US goods entering the country. The Government argues the move is aimed a stimulating an influx of US imports, signalling a commitment to “equitable trade and enhanced bilateral co-operation” despite the current trade tensions.

According to the analysis, local businesses importing capital goods, machinery, and technology from the US stand to gain from the reduced costs, potentially boosting competitiveness and allowing them to offer attractive pricing. Cheaper access to US technology could also contribute to the modernisation of Zimbabwe’s industries, aligning with national development strategies.

Furthermore, the elimination of tariffs might spur market expansion, encouraging local firms to diversify their offerings and explore new avenues for growth, both domestically and internationally. Increased access to high-quality US goods and technology may also drive product innovation and attract foreign direct investment seeking to capitalise on lower import costs.

“Eliminating tariffs and reducing the cost of imports may encourage business firms to diversify their product lines, possibly leading to new market opportunities both domestically and in export markets, which enhance overall business competitiveness,” said NCC.

“Product diversification enhances business competitiveness by reducing reliance on a single revenue stream, mitigating market risks, and capturing new customer segments.

“By expanding into complementary products or markets, for instance, a sugarcane farmer producing ethanol or molasses, businesses leverage existing resources, improve resilience to price fluctuations and capitalise on emerging opportunities.

“Diversification also fosters innovation, strengthens brand value, and creates economies of scale, giving firms an edge over rivals in dynamic markets like Zimbabwe’s agribusiness sector.”

While these benefits are anticipated, the NCC’s analysis highlights some risks associated with this policy shift.

The commission warned of potential “negative impacts on domestic industries and a potential decline in Government revenue.”

The NCC noted that removing tariffs could harm Zimbabwe’s domestic industries, particularly agriculture, textiles, and processed foods, making them unable to compete with cheaper US imports. This would lead to decreased sales, lower profits, and potential business closures, causing job losses, hindering industrial growth, and increasing reliance on foreign products, ultimately weakening Zimbabwe’s economic sovereignty.

The increased imports and discouraged exports would worsen the trade deficit, deplete foreign currency reserves, and potentially devalue the ZiG, leading to inflation.

While some job creation might occur in sectors benefiting from cheaper imports, significant job losses are expected in labour-intensive industries like sugar processing, clothing, and small-scale farming, exacerbating poverty, hindering skills development, and increasing unemployment.

To mitigate the negative impacts, NCC proposed several recommendations, including a gradual phase-out of tariffs for sensitive sectors with regular impact assessments, strategic support for domestic industries through subsidies, tax incentives, and a technology transfer programme, investment in infrastructure and skills development for industrial modernisation.

It also proposes the promotion of value addition by importing raw materials for local processing; diversifying export markets and supporting export-oriented industries; strengthening regulatory institutions to ensure fair competition; and encouraging local innovation and research and development (R&D) through grants and support for innovation hubs.

“Removing tariffs can provide numerous benefits by enhancing cost efficiency, product access, and overall competitiveness.

‘‘However, there are potential negative impacts on local industries and the economy relating to trade imbalance, unfair competition, job losses and industry closures, among others.

“It is therefore important for the country to balance these aspects to promote business competitiveness and economic growth towards an upper middle-income economy in line with Vision 2030.”-herald