Lesotho’s Textile Sector: Closure Crisis Amid Tariff Changes

BREAKING: Lesotho Faces Economic Crisis as US Tariffs Threaten Textile Sector

Maseru, Lesotho – Lesotho’s vital textile industry is facing a severe downturn, with meaningful job losses and potential factory closures looming, following the imposition of increased U.S.tariffs. The change, which saw tariffs rise from 0% to 15%, is severely hampering the nation’s ability to compete in the crucial American market, according to industry representatives.

Chen,a spokesperson for the Lesotho textile sector,highlighted the immediate impact. “We are already being charged 10% [on imports from other countries], which makes it challenging for us to compete on an equal footing,” Chen stated, pinpointing Kenya, which enjoys a more favorable 10% tariff, as Lesotho’s strongest competitor. The consequence, Chen warned, is stark: “Many factories will have to shut down.” He added that many factories had already been forced to lay off workers when the tariffs were first announced in April, underscoring the sensitivity of the sector to trade policy shifts.

The economic implications are especially dire for Lesotho, a lower-middle-income country where nearly half of its 2.3 million population lives below the poverty line, and a quarter are unemployed. In 2024, U.S.-Lesotho bilateral trade reached $240.1 million, with clothing being a significant export. Other exports include diamonds and various other goods.

Lesotho’s Minister of Trade, Industry and Business Advancement, Mokhethi Shelile, confirmed that while initial meetings with U.S. trade representatives had resulted in some tariff reduction, further concessions are critical. “We remain committed to pushing for a further reduction to the minimum tariff level of 10 percent, which is essential for our textile sector to compete effectively in the US market,” Shelile stated. He confirmed ongoing diplomatic efforts, noting, “I have already communicated with the U.S. Embassy regarding continued negotiations.”

The broader regional impact is also significant, with neighboring South Africa also facing substantial new U.S. tariffs. A reported 30% reciprocal tariff announced by the Trump administration is expected to have a considerable impact on South Africa’s agriculture and manufacturing sectors, illustrating a wider pattern of challenges for African economies navigating U.S. trade policy.Evergreen Insights:

This situation highlights the delicate balance of global trade and the profound impact of tariffs on developing economies. For nations like Lesotho, heavily reliant on export markets, favorable trade agreements and predictable tariff structures are not merely economic policies but lifelines for their industries and citizens.

Dependence on Key Markets: The Lesotho case underscores how a nation’s economic stability can be intricately tied to its ability to access major markets like the United States. Diversification of export markets and products remains a long-term strategic goal for many developing nations.
trade Agreements and Competitiveness: The disparity in tariffs, as noted with Kenya, demonstrates how nuanced trade policies can create significant competitive advantages or disadvantages. Understanding and negotiating favorable trade terms is crucial for industrial development.
vulnerability of Lower-middle Income Countries: Nations classified as lower-middle income often have less diversified economies and fewer resources to absorb economic shocks. External policy changes, like new tariffs, can have a disproportionately severe impact on employment and poverty levels.
the Role of diplomacy: the continuous engagement between Lesotho’s government and U.S. trade representatives shows the critical role of active diplomacy in mitigating the negative effects of trade disputes and seeking mutually beneficial solutions.

The ongoing efforts by Lesotho to secure a more favorable tariff rate reflect a broader struggle among developing nations to create sustainable economic growth in an ever-changing global trade landscape.

How do changes to preferential trade agreements like AGOA directly threaten Lesotho’s textile sector and its contribution to the national GDP?

The Looming Threat to Lesotho’s Economy

Lesotho’s textile industry,a cornerstone of its economy and a major employer,is facing a significant crisis. Recent shifts in global trade,specifically changes to preferential trade agreements and rising tariffs,are driving factory closures and threatening the livelihoods of tens of thousands of Basotho workers. This article delves into the complexities of this situation, examining the causes, consequences, and potential solutions for Lesotho’s struggling textile sector.

Understanding Lesotho’s Textile Industry

For decades, Lesotho has thrived as a low-cost manufacturing hub, primarily focused on apparel production for export. The industry benefited immensely from the African Growth and Opportunity Act (AGOA), a US trade preference program granting duty-free access to the American market. This access fueled considerable growth, making textiles the largest sector in Lesotho’s economy, accounting for approximately 36% of GDP and employing over 40,000 people – a significant portion of the formal workforce. Key export markets include the United States, South Africa, and the european Union. The industry largely operates on a Cut-Make-Trim (CMT) basis, meaning Lesotho provides labor for cutting, sewing, and finishing garments designed and sourced elsewhere.

The Impact of AGOA Renewal uncertainty & Tariff Hikes

The primary driver of the current crisis is the uncertainty surrounding the renewal of AGOA, which expired in September 2025. While a renewal is anticipated, delays and potential modifications to the agreement have created significant anxiety among investors.

Beyond AGOA, several other factors are exacerbating the situation:

Rising Tariffs: Increased tariffs imposed by the US on certain chinese textiles have indirectly impacted Lesotho. As brands seek choice sourcing locations to avoid these tariffs, Lesotho is not always competitive due to higher labor costs compared to other Asian countries.

Increased Competition: Countries like Vietnam,Bangladesh,and Cambodia offer even lower labor costs and have invested heavily in infrastructure,making them attractive alternatives for apparel manufacturers.

South African Trade Policies: Changes in South African import regulations and tariffs also affect Lesotho, as South Africa is a key transit point for goods destined for international markets.

Global Economic Slowdown: Reduced consumer demand in key export markets, particularly the US and Europe, has led to decreased orders for Lesotho’s textile factories.

Factory Closures and Job Losses: A Growing Trend

The consequences of these challenges are already being felt.Several major textile factories in Lesotho have announced closures or significant downsizing in recent months.

Suntex Lesotho: Announced the closure of its factory in early 2025, resulting in over 2,000 job losses.

C&H Garments: Reduced its workforce by 1,500 employees due to decreased orders.

Numerous Smaller Factories: Several smaller factories have also shut down, contributing to a cumulative loss of over 5,000 jobs in the first half of 2025 alone.

These closures have a devastating impact on local communities, leading to increased poverty and social unrest. The textile worker crisis is a major concern for the Lesotho government.

The Role of Labor Costs and Productivity

While trade policies are a major factor,Lesotho’s relatively high labor costs compared to competitors also play a role. Minimum wage increases, while intended to improve the living standards of workers, have made Lesotho less attractive to some manufacturers.

However,focusing solely on labor costs overlooks the importance of productivity. Lesotho’s textile industry needs to invest in:

1. Skills Progress: Training programs to enhance worker skills and improve efficiency.
2. Technology Upgrades: Modernizing factories with automated equipment to increase output.
3. Supply Chain Optimization: Streamlining the supply chain to reduce lead times and costs.

Diversification Strategies: Beyond Apparel

To mitigate the risks associated with over-reliance on the apparel sector, Lesotho needs to pursue economic diversification. Potential areas for growth include:

Value-Added Textiles: Moving beyond CMT to incorporate design, branding, and higher-value manufacturing processes.

Leather products: Leveraging Lesotho’s livestock industry to develop a leather processing and manufacturing sector.

tourism: Expanding the tourism sector to create alternative employment opportunities. (See https://www.routard.com/fr/guide/a/itineraires-conseilles/afrique/lesotho for tourism route ideas)

Agribusiness: Investing in agricultural processing and value addition.

Government Initiatives and International Support

The Lesotho government is actively seeking solutions to address the crisis. Key initiatives include:

Negotiating with AGOA: Lobbying for the renewal and expansion of AGOA benefits.

Attracting Foreign Investment: Creating a more favorable investment climate to attract new manufacturers.

Supporting Skills development: Investing in training programs to improve worker skills.

* Seeking international Aid: Collaborating with international organizations to secure financial and technical assistance.

International partners,such as the US government and the European Union,are also providing support through trade preference programs and development assistance.

Case Study: The Impact on Maseru Industrial Estate