The Central Bank of Kenya (CBK) has warned that despite the global economy experiencing a slight easing in inflation rates in the past week, the new tariffs imposed by the United States on Wednesday last week are catalysts for raising inflation, supply chain disruption, and financial market volatility.
In its weekly bulletin, CBK noted that the country, like many others that have been hit with trade tariffs by the US, is likely to see volatility in the financial markets, which will affect the prices of stocks, bonds, commodities, and the Kenyan Shilling.
Furthermore, CBK fears the 10 per cent trade tariff slapped on most countries is likely to push global inflation upwards, which will see the prices of imports also rise.
"However, trade tensions escalated during the week following the announcement of new tariffs by the US administration on all US imports, raising concerns about inflation, supply chain disruptions, and financial market volatility," it stated.
This comes as experts indicate that the CBK may cut borrowing costs for a fifth straight meeting on Tuesday, viewing the inflation rate as likely to remain below the 5 per cent midpoint of their target range in the near term.
According to a report this month by the Kenya National Bureau of Statistics (KNBS), the country experienced its fourth consecutive inflation increase this year, which now stands at 3.6 percent. This is projected to climb higher if the country does not implement measures to counter the tariffs.
The next meeting of the Monetary Policy Committee (MPC) will be held on Tuesday, April 8, 2025.
Additionally, according to the CBK, the dollar index has strengthened by 0.3 per cent during the past seven days, which it attributes to the safe haven demand amid heightened trade policy uncertainties.
On Thursday, April 3, US President Donald Trump signed a new directive that would impose tariffs on countries that apply Value Added Tax (VAT) on imported US products.
In Africa, 25 countries are set to be affected by the tariffs, with Lesotho (50 per cent), Madagascar (47 per cent), Mauritius (40 per cent), Botswana (37 per cent), Angola (32 per cent), Libya (31 per cent), and South Africa (30 per cent) being the hardest hit, while Egypt, Morocco, Kenya, Ethiopia, and Ghana are the least hit, with 10 per cent each.
Economic analysts globally have projected that Donald Trump's administration's new tariffs will result in higher consumer prices, high costs for businesses, and increased consumer spending.
The analysts have further warned that the new tariffs might be the start of a recession in the United States.
In Kenya, the new tariffs are expected to affect Kenyan exports, particularly in key sectors such as textiles, tea, and coffee, which had previously been exempt from tariffs under the African Growth and Opportunity Act (AGOA).
Additionally, the new directive is projected to lead to reduced exports, job losses, and lower revenues for businesses relying on the American market.
In a statement on Thursday, April 3, the Trade, Investment, and Industry Cabinet Secretary, Lee Kinyanjui, called for increased investment in infrastructure, technology, and skills development to counter the tariffs.
"The nation has weathered global economic shifts before, and with government backing and private sector ingenuity, it can bridge these gaps. By prioritising key sectors and streamlining logistics, Kenya can mitigate the tariff’s sting while building a more self-sufficient economy," he said.
