The Kenyan shilling will face new pressures as the US dollar begins to surge after the United States and China agree to lower tariffs in a deal hammered out in Geneva over the weekend.
In the deal announced on Monday, May 12, the two countries that have been in a trade war for the last two months agreed to lower tariffs, a move that is likely to impact the global economy.
As part of an agreement, the US will lower tariffs on Chinese goods to 30 per cent from the current 145 per cent, and China will reduce duties on US imports to 10 per cent from 125 per cent.
US Treasury Secretary Scott Bessent indicated that an agreement has been reached with China on a 90-day pause, which is expected to take effect from May 14.
Although the news is great for the global economy, it means Kenyans could soon be faced with spending more to buy goods priced in dollars, making imports like fuel, medicine, electronics, and food more expensive.
On Sunday, it emerged that the two countries were reaching an agreement, and almost immediately, the dollar, which was losing its status as a global safe haven, began to make gains.
The shilling has remained resilient against the US dollar, which has been facing huge pressures. It has traded below Ksh130 since late last year and closed last week trading at Ksh129.27.
This raises the cost of living and drives up inflation, especially since fuel prices affect transport and electricity. It also increases the burden of Kenya’s dollar-denominated debt, making it costlier for the government to repay loans.
For students studying abroad or businesses relying on imported equipment, a stronger dollar translates to higher costs. Local industries may struggle to compete with cheaper imports, squeezing profit margins and slowing down economic growth.
If the dollar continues its rise, families receiving remittances from abroad will get more shillings for every dollar sent home. Exporters of tea, coffee, and flowers are also tipped to earn more when they convert dollar payments, boosting revenues.
The agreement is set to shove the global economy back on track, providing relief for countries like Kenya. Projections of the global GDP growth this year have been doomsday-like, with the World Bank projecting a 2.7 per cent growth for both 2025 and 2026, marking a stagnation compared to previous years.
The multilateral lender had warned that proposed US tariffs could reduce global economic growth by 0.3 percentage points in 2025 if trading partners retaliate.
