Zimbabwe's suspension of tariffs on US goods triggers debate

The recent decision by the Zimbabwean Government to suspend a 35 percent tariff previously levied on goods from the United States has ignited a spirited debate among economic stakeholders, with the National Competitiveness Commission of Zimbabwe (NCCZ) and economists urging authorities to implement additional support measures to safeguard local industries.

The suspension, which was announced last month, came in response to the imposition of an 18 percent reciprocal tariff by Washington on Zimbabwe's exports, marking a move by Harare to promote equitable trade relations and strengthen bilateral ties with the US.

The NCCZ has argued that the tariff suspension presents significant opportunities for local businesses, particularly in accessing capital goods, machinery, and modern technologies from the US at reduced costs. The Commission pointed out that lowering tariffs could help local firms reduce operational costs, enhance competitiveness, and foster industrial modernization in line with Zimbabwe's development plans, including the Zimbabwe Industrial Reconstruction and Growth Plan (ZIRGP) and National Development Strategy 1 (NDS1).

"Removing tariffs gives Zimbabwean businesses the chance to import capital goods, machinery and plant equipment from the USA at a reduced cost," said NCCZ. "This reduces operational costs and enhances competitiveness, which is critical for achieving industrial modernization."

Furthermore, the NCCZ highlighted the potential for foreign direct investment (FDI) to inject both capital and skills into the economy, introducing global best practices and quality standards that could improve local supply chains and integrate Zimbabwe into global value chains. The Commission also suggested that businesses could diversify their products and enter new markets, citing the example of an agricultural producer shifting into ethanol and molasses production to boost revenue.

Economist Tinevimbo Shava echoed these sentiments, noting that the tariff suspension could spur innovation and cost efficiency. "Lower input costs mean businesses can diversify products, reduce consumer prices and compete more aggressively in local and regional markets," he said.

In addition to the positive outlook, Shava pointed out that the move could position Zimbabwe as a more attractive destination for global investors, particularly in the mining and manufacturing sectors, where infrastructure and input costs are critical factors.

However, the suspension has not been universally welcomed. Economist Gladys Shumbambiri-Mutsopotsi raised concerns about potential risks for domestic manufacturers, warning that removing tariffs could expose local industries to unfair competition from more efficient US producers. She emphasized that sectors like agriculture, textiles, and food processing, which lack the scale and technology of their US counterparts, could struggle to compete, leading to business closures and job losses.

"Removing tariffs exposes local producers of import substitutes to unfair competition from more efficient US producers," Shumbambiri-Mutsopotsi said. "Without adequate support, this could lead to job losses, business closures and the erosion of our industrial base."

The economist also expressed fears that the tariff suspension could worsen Zimbabwe's trade imbalance and increase dependency on imports, undermining efforts toward industrialization.

In response to these concerns, the NCCZ, Shava, and economist Dr. Prosper Chitambara jointly recommended a phased approach to tariff liberalization. They advocated for a gradual phase-out, especially for sensitive industries, to allow local businesses time to adjust and scale up their operations. Additionally, they called for targeted subsidies and tax incentives for vulnerable sectors, such as small manufacturers and labor-intensive industries.

"We need to ensure that vulnerable sectors, particularly small manufacturers, have the support they need to survive in this more competitive environment," said Dr. Chitambara. "A phased approach allows time for businesses to adjust and improve their productivity."

The economists also proposed technology transfer programs through partnerships between local and US firms to help improve domestic capacity and competitiveness. They suggested prioritizing the importation of raw or intermediate goods rather than finished products, to promote local value addition and build domestic capabilities.

Moreover, the economists emphasized the need for Zimbabwe to diversify its trade relations beyond the US and implement policies that promote export growth. They called for stronger institutional capacity at Zimra (Zimbabwe Revenue Authority) and ZimStat (Zimbabwe National Statistics Agency) to monitor trade dynamics and prevent unfair practices like dumping.

Encouraging innovation was also seen as crucial for Zimbabwe's economic growth. "We need to incentivize research and development (R&D) and support innovation hubs, particularly in agriculture, ICT, and manufacturing," said Dr. Chitambara.

The stakeholders also suggested that Zimbabwe should avoid unilateral trade reforms and instead work within regional frameworks like SADC (Southern African Development Community) and the African Union. This would allow for greater bargaining power in trade negotiations and help avoid a race to the bottom in terms of trade policy.

While the tariff suspension offers potential short-term gains through lower input costs and improved access to US goods, analysts agreed that Zimbabwe must carefully balance its approach to avoid undermining local industries.

"If done properly, this reform can support our Vision 2030 ambitions by enhancing competitiveness and attracting investment," Shava concluded. "But without adequate safeguards, we risk industrial regression and economic vulnerability."

As the debate continues, the government will need to ensure that any trade liberalization measures are complemented by targeted support to help local industries thrive and contribute to the country's long-term economic growth.