Why Egypt Is Rooting For Trump’s Trade War To Last

-Analysis-

CAIRO — The negative reaction to U.S. President Donald Trump‘s tariffs centers mostly on the new barriers it places on access to the U.S. market. Yet Egypt is looking at the situation differently than most other countries. For starters, the tariffs on our country are limited to 10%, which will not cause significant harm considering the relatively modest volume of Egyptian exports to the United States.

But there is another angle that has received much less attention: the tariffs announced on April 2 place a heavy burden on several Southeast Asian countries, which are Egypt‘s main competitors in the U.S.. This presents a good opportunity to actually increase Egypt’s exports to the American market.

The real challenge facing Egyptian exports is not Trump’s tariffs, but rather a lack of experience and insufficient investment to seize this opportunity, according to leaders in the textile industry speaking to Al-Manassa.

For Fadel Marzouk, head of the Export Council for Ready-Made Garments, Egypt’s benefit from Trump’s tariffs is no longer speculative — it has already become a reality in recent days.

Following the tariff announcement, several U.S. importers have started asking Egyptian factories to increase their production capacity in the coming period, in an attempt to find an alternative to Chinese exports that will become more expensive due to the imposed tariffs.

Competing with the Asian Tigers

The final price of Egyptian products, which are subject only to the minimum Trump tariffs, will be cheaper than their Asian competitors. Marzouk told Al-Manassa that since the tariffs were announced, his company’s exports have risen by 15%, and he expects a further increase.

On April 2, Trump extended the protectionist policies he has pursued since the start of his second term by announcing a minimum 10% tariff on all imported goods, with higher tariffs on major trade partners. Although he later announced a 90-day negotiation window with all countries regarding the new tariffs, he escalated tariffs on China, raising them to a total of 145%.

It’s a golden opportunity for Egypt’s garment sector.

Reports indicate that clothing and shoe prices in the U.S. will rise due to the heavy tariffs on exporters, particularly from Southeast Asia, at a time when the U.S. imports 97% of its consumption of these products.

Since Egypt is only subject to the minimum Trump tariffs, its final consumer price in the U.S. will be cheaper than that of its Asian competitors. This represents a “golden opportunity for Egypt’s garment sector,” according to Mohamed Abdel Salam, head of the Ready-Made Garments Chamber at the Federation of Egyptian Industries.

“The tariffs imposed on Egypt are minimal compared to its Asian competitors in the U.S. market, primarily Indonesia, Bangladesh, the Philippines, and Thailand, whose exports to the U.S. are subject to tariffs mostly exceeding 30%,” Abdel Salam added.

Trump’s tariffs coincide with a noticeable boom in Egyptian garment exports, which grew by 17% in the first ten months of 2024 compared to the same period the previous year, reaching $2.2 billion. The U.S. is the primary destination for more than half of these exports.

Despite the importance of the U.S. market for Egyptian garment manufacturers, they have not managed to secure a strong foothold due to competition from Asian exporters, who dominate the market. For example, China leads knitwear exports to the U.S. with 10%, followed by Vietnam at 7.8%, and Cambodia and Bangladesh at 2.4%, while Egypt’s share is only 0.6%.

Attracting direct investment

Coinciding with the disruptions caused by the tariffs in the markets, Egyptian exporters have received inquiries from global brands looking to shift production capacity from Southeast Asia to Egypt.

This suggests that the benefits may go beyond just increased exports by Egyptian factories and extend to attracting foreign investment interested in operating in Egypt.

“If these conditions persist and the Trump administration doesn’t reverse its decisions, this will help attract foreign investment in the garment sector,” says Abdel Salam. “The Chinese, for example, will not be able to bear the heavy tariffs imposed on their products, and they will seek out factories in countries exempt from tariffs or subject to minimal ones, like Egypt.“

Still, some are skeptical of the optimistic expectations regarding the impact of Trump’s tariffs on Egypt, which had already enjoyed preferential trade treatment from the U.S. for over two decades and still has not managed to significantly increase its exports as hoped.

This preferential treatment came in the form of the Qualified Industrial Zones (QIZ) agreement, launched in 2004, which grants Egypt full exemption from U.S. tariffs in exchange for importing Israeli production components accounting for 10.5% of the product. Yet exports from QIZ factories are limited to $1.15 billion, according to 2023 data.

“When the QIZ agreement was signed 20 years ago, there were expectations that exports to the U.S. would increase tenfold from their current value,” said Magdy Tolba, former head of the Export Council for Ready-Made Garments, to Al-Manassa. “But the limited production capacities in factories and the shortage of trained labor have prevented the garment sector from fully benefiting from these exemptions.”

The wages question

Tolba believes that improving access to the U.S. market requires more than just easing tariff restrictions: “We need to build new factories and create a more favorable investment climate. Egypt needs to increase its number of factories tenfold, and the licensing procedures, which are slow, must be reviewed, as well as the pricing of industrial land to encourage both local and foreign investors, especially amid manufacturers’ complaints about the high cost of land.”

The garment sector suffers from the exodus of many workers to foreign markets.

The garment sector also suffers from the exodus of many workers to foreign markets, particularly Turkey and Russia, due to the low wages in Egyptian factories, where a worker’s weekly salary does not exceed EGP 10,000 ($195)

Khaled Fayid, deputy head of the Garments Division at the Chambers of Commerce, said the impact of the land availability issue for manufacturers: “All the land plots offered in governorate regions face logistical difficulties and lack infrastructure, in addition to the lack of banking facilities from Egyptian banks to manufacturers, especially in terms of offering low-interest rates.”

Fadel Marzouk, head of the Export Council for Ready-Made Garments, is well aware of these challenges, but remains optimistic about Egypt’s ability to benefit from the trade war weighing down its biggest competitors. “The sector is currently growing better, and we aim to increase exports to $12 billion by 2030 by boosting the sector’s efficiency and competitiveness,” he said. “We must improve infrastructure, facilitate factory licensing procedures, and offer new incentives to foreign companies interested in investing in Egypt.”