AGOA Expiry: Nonrenewal Welfare, Macroeconomic and Trade Effects
Abstract
The expiry of the African Growth and Opportunity Act (AGOA) in 2025 has raised uncertainty about the future of United States–Sub-Saharan Africa trade relations. This study employs the Global Trade Analysis Project (GTAP) Computable General Equilibrium (CGE) model to assess the potential trade, welfare, and macroeconomic impacts of AGOA’s non-renewal under two scenarios: the reversion of US tariffs to Most Favoured Nation (MFN) levels and the imposition of a uniform 10% reciprocal tariff. Results (see Scenario 2) indicate that AGOA countries could experience welfare losses of up to US$1.78 billion and GDP contractions of 0.52%, accompanied by significant declines in exports of textiles, mining, and manufacturing. The United States (US) would also face moderate welfare losses, while China and the EU would gain from trade diversion. The findings highlight the urgent need for Sub-Saharan African countries to diversify trade partnerships and negotiate new frameworks to mitigate adverse post-AGOA outcomes.
References
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[37] Porter, M. E., & Kramer, M. R. (2011). How to reinvent capitalism—and unleash a wave of innovation and growth. Management and Sustainability in Business, 323.
[38] Prinsloo, C. (n.d.). AGOA and the future of US–Africa trade relations. http://www.saiia.org.za/opinion-analysis/agoa-and-the-future-of-us-africa-trade-relations
[39] Ricardo, D. (1817). On the principles of political economy and taxation. John Murray.
[40] Rodrik, D. (2018). What do trade agreements really do? Journal of Economic Perspectives, 32(2), 73–90.
[41] Romer, P. (1994). New goods, old theory, and the welfare costs of trade restrictions. Journal of Development Economics, 43(1), 5–38.
[42] Samuelson, P. A. (1948). International trade and the equalisation of factor prices. Economic Journal, 58(230), 163–184.
[43] Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. W. Strahan and T. Cadell.
[44] Stiglitz, J. E. (2002). Towards a new paradigm for development: Strategies, policies and processes. 116–122.
[45] Tullock, G. (2008). The welfare costs of tariffs, monopolies, and theft. In 40 years of research on rent seeking (Vol. 1, pp. 45–53). Springer.
[46] Winant, E. (2017, March 23). African Growth and Opportunity Act. Presentation to North-West University International Trade students.
[47] AGOA. (2013). South Africa: Clothing and textiles can contribute to job creation. https://agoa.info/news/article/5102-south-africa-clothing-textiles-can-contribute-to-job-creation.html
[48] AGOA. (2017). AGOA country eligibility. https://agoa.info/about-agoa/country-eligibility.html
[49] AGOA. (2023). AGOA beneficiaries’ combined US trade – disaggregated by sector. https://agoa.info/data/bilateral-trade-data.html
[50] USTR (United States Trade Representative). (n.d.). African Growth and Opportunity Act (AGOA). https://ustr.gov/issue-areas/trade-development/preference-programs/african-growth-and-opportunity-act-agoa
[2] Anderson, J. E., & Neary, J. P. (2007). Welfare versus market access: The implications of tariff structure for tariff reform. Journal of International Economics, 71(1), 187–205.
[3] Anderson, J. E., & Neary, J. P. (2020). The economics of Brexit: A cost-benefit analysis of the UK’s economic relationship with the EU. VoxEU.org eBook.
[4] Artuç, E., Porto, G., & Rijkers, B. (2021). Household impacts of tariffs: Data and results from agricultural trade protection. The World Bank Economic Review, 35(3), 563–585.
[5] Aydin, R., Lögün, A., Alpagut, S., & Aydin, B. (2022). The effects of trade wars on world welfare. International Journal of Contemporary Economics and Administrative Sciences, 12(1), 460–482.
[6] Baldwin, R., & Wyplosz, C. (2020). Economics of European integration (6th ed.). McGraw-Hill Education.
[7] Becker, G. S. (2024). Human capital: A theoretical and empirical analysis, with special reference to education. University of Chicago Press. https://press.uchicago.edu/ucp/books/book/chicago/H/bo3684031
[8] Benguria, F. (2023). The global impact of the US–China trade war: Firm-level evidence. Review of World Economics, 159(4), 827–851. DOI: https://doi.org/10.1007/s10290-022-00490-1
[9] Bhagwati, J. N. (1965). On the equivalence of tariffs and quotas. The Review of Economic Studies, 32(1), 81–89. Available at: https://www.jstor.org/stable/2295810
[10] Bown, C. P. (2018). The WTO and the crisis of multilateralism. Journal of Economic Perspectives, 32(4), 73–96. DOI: https://doi.org/10.1257/jep.32.4.73
[11] Bown, C. P., & Crowley, M. A. (2013). Trade deflection and trade depression. The Review of Economics and Statistics, 95(5), 1588–1601. DOI: https://doi.org/10.1162/REST_a_00350
[12] Crowley, M. A. (2019). Trade war: The clash of economic systems threatening global prosperity. VoxEU.org.
[13] Dhingra, S., Freeman, R., & Huang, H. (2023). The impact of non‐tariff barriers on trade and welfare. Economica, 90(357), 140–177.
[14] Fajgelbaum, P., Goldberg, P., Kennedy, P., Khandelwal, A., & Taglioni, D. (2024). The US-China trade war and global reallocations. American Economic Review: Insights, 6(2), 295–312.
[15] Felbermayr, G., Jung, B., & Larch, M. (2015). The welfare consequences of import tariffs: A quantitative perspective. Journal of International Economics, 97(2), 295–309.
[16] Fetzer, T., & Schwarz, C. (2021). Tariffs and politics: Evidence from Trump’s trade wars. The Economic Journal, 131(636), 1717–1741.
[17] Freund, C., & Ornelas, E. (2010). Regional trade agreements. Annual Review of Economics, 2(1), 139–166.
[18] Gereffi, G. (1999). International trade and industrial upgrading in the apparel commodity chain. Journal of International Economics, 48(1), 37–70.
[19] Goldberg, P. K., & Pavcnik, N. (2016). The effects of trade policy. In G. Gopinath, E. Helpman, & K. Rogoff (Eds.), Handbook of international economics (Vol. 5, pp. 197–261). Elsevier.
[20] Grossman, G. M., Helpman, E., & Redding, S. J. (2024). When tariffs disrupt global supply chains. American Economic Review, 114(4), 988–1029. https://doi.org/10.1257/aer.20211519
[21] Hamilton, A. (1790). Report on manufactures. U.S. Department of the Treasury.
[22] Heckscher, E. (1919). The effect of foreign trade on the distribution of income. Ekonomisk Tidskrift, 21(4), 497–512. Available at: https://www.jstor.org/stable/3437522
[23] Helpman, E., & Krugman, P. (1985). Market structure and foreign trade: Increasing returns, imperfect competition, and the international economy. MIT Press.
[24] Heydon, K., & Woolcock, S. (n.d.). The rise of bilateralism: Comparing American, European, and Asian approaches to preferential trade agreements. Brookings Institution. https://www.brookings.edu/book/the-rise-of-bilateralism/
[25] Ju, J., Ma, H., Wang, Z., & Zhu, X. (2024). Trade wars and industrial policy competitions: Understanding the US-China economic conflicts. Journal of Monetary Economics, 141, 42–58.
[26] Krolikowski, P. M., & McCallum, A. H. (2021). Market frictions and international trade. Journal of International Economics, 129, 103411.
[27] Krueger, A. O. (1978). Foreign trade regimes and economic development: Liberalisation attempts and consequences. Ballinger.
[28] Krugman, P. R. (1980). Scale economies, product differentiation, and the pattern of trade. American Economic Review, 70(5), 950–959.
[29] List, F. (1841). The national system of political economy. Longmans, Green, and Co.
[30] Magee, S. P., Bergsten, C. F., & Krause, L. (1972). The welfare effects of restrictions on US trade. Brookings Papers on Economic Activity, 1972(3), 645–707.
[31] Maluck, J., Glanemann, N., & Donner, R. (2018). Bilateral trade agreements and the interconnectedness of global trade. Frontiers in Physics, 6, 1–13.
[32] McDonald, B. (n.d.). International trade: Commerce among nations. https://www.imf.org/external/pubs/ft/fandd/basics/trade.htm
[33] Mevel, S., & Karingi, S. (2012). Deepening regional integration in Africa: A computable general equilibrium assessment of the establishment of a continental free trade area followed by a continental customs union. In 7th African Economic Conference, Kigali, Rwanda. UNECA.
[34] Mitra, D., Thomakos, D. D., & Ulubasoglu, M. A. (2002). Can we obtain realistic tariff equilibria? Evidence from multi-country tariff rate quotas. Journal of International Economics, 57(2), 353–367.
[35] Ohlin, B. (1933). Interregional and international trade. Harvard University Press.
[36] Osang, T., & Turnovsky, S. J. (2000). Differential tariffs, growth, and welfare in a small open economy. Journal of Development Economics, 62(2), 315–342.
[37] Porter, M. E., & Kramer, M. R. (2011). How to reinvent capitalism—and unleash a wave of innovation and growth. Management and Sustainability in Business, 323.
[38] Prinsloo, C. (n.d.). AGOA and the future of US–Africa trade relations. http://www.saiia.org.za/opinion-analysis/agoa-and-the-future-of-us-africa-trade-relations
[39] Ricardo, D. (1817). On the principles of political economy and taxation. John Murray.
[40] Rodrik, D. (2018). What do trade agreements really do? Journal of Economic Perspectives, 32(2), 73–90.
[41] Romer, P. (1994). New goods, old theory, and the welfare costs of trade restrictions. Journal of Development Economics, 43(1), 5–38.
[42] Samuelson, P. A. (1948). International trade and the equalisation of factor prices. Economic Journal, 58(230), 163–184.
[43] Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. W. Strahan and T. Cadell.
[44] Stiglitz, J. E. (2002). Towards a new paradigm for development: Strategies, policies and processes. 116–122.
[45] Tullock, G. (2008). The welfare costs of tariffs, monopolies, and theft. In 40 years of research on rent seeking (Vol. 1, pp. 45–53). Springer.
[46] Winant, E. (2017, March 23). African Growth and Opportunity Act. Presentation to North-West University International Trade students.
[47] AGOA. (2013). South Africa: Clothing and textiles can contribute to job creation. https://agoa.info/news/article/5102-south-africa-clothing-textiles-can-contribute-to-job-creation.html
[48] AGOA. (2017). AGOA country eligibility. https://agoa.info/about-agoa/country-eligibility.html
[49] AGOA. (2023). AGOA beneficiaries’ combined US trade – disaggregated by sector. https://agoa.info/data/bilateral-trade-data.html
[50] USTR (United States Trade Representative). (n.d.). African Growth and Opportunity Act (AGOA). https://ustr.gov/issue-areas/trade-development/preference-programs/african-growth-and-opportunity-act-agoa
Published
2025-12-30
How to Cite
MHONYERA, Gabriel.
AGOA Expiry: Nonrenewal Welfare, Macroeconomic and Trade Effects.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 16, n. 4, p. 943 - 958, dec. 2025.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/9261>. Date accessed: 29 dec. 2025.
doi: https://doi.org/10.14505/tpref.v16.4(36).11.
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