As announced by President Trump on 2 April 2025, almost all countries are now subject to an individual U.S. Reciprocal Tariff (RT), with a minimum rate of 10%. U.S. imports of goods from Mauritius will thus be subject to a RT of 40%, effective from 9 April 2025. The calculated RT is 80% for Mauritius, but is then reduced by half, as for all countries, out of the U.S. President’s “kindness”.

The U.S. executive order provides that the RT for a country can be modified if the country takes “significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the United States on economic and national security matters”. This provides scope for RT negotiations with the U.S. To benefit from a reduction in the RT rate, a country could reduce or eliminate its existing tariffs or other trade encumbrances on its imports from the U.S.

President Trump announced a review of the RT on Vietnam following a Vietnamese pledge to abolish duties and purchase more U.S. goods as part of a trade deal. India and Israel are also negotiating with the U.S. for new trade arrangements. Réunion Island was initially slapped with an adjusted RT of 37%, which was then reduced to 10%, in line with other French overseas territories.

Derivation and Rationale

The U.S. RT determination for Mauritius is unrelated to the actual level of Mauritian tariffs on its imports of goods from the U.S. It is based on a common derivation for all countries, namely, the ratio of the U.S. trade deficit with a country to U.S. imports from the country. The U.S. RT for Mauritius is the level of U.S. tariffs that would eliminate the U.S. goods deficit with Mauritius (see note).

The calculated figure of a RT of 80% for Mauritius is based on U.S. trade data for 2024, as shown below:

If trade data for the previous two years were used, the RT would be less than 65%, highlighting the high annual variability of the derived rate. Trade data published by Statistics Mauritius differ from U.S. trade data due to freight and insurance costs (cif), which are, by definition, included in a country’s imports as imports cif, but not in its exports, which are on a fob basis.

Freight and insurance costs of U.S.-Mauritius trade are substantial, averaging 95% of the imports fob value, and 33% of the fob value exports in 2024. Mauritius could appeal to the U.S. to review the 80% RT to account for high data variability, and settle instead on a three-year average, which currently stands at 68%. The applicable adjusted RT would then be a less unfavorable 34%

The U.S. rationale is that any country’s U.S.trade deficit results from tariffs, non-tariff barriers and currency manipulation, and that the RT reflects these three factors. However, a country may run a U.S. trade deficit even without any tariffs on its imports from the U.S., or non-tariff barriers or currency manipulation. But the country would still be subject to a U.S. RT, which does not make sense

The calculation of the RT as the tariff rate required to balance the goods trade between the U.S. and every other country is widely criticized as devoid of economic reasoning. The U.S. can still achieve an overall trade balance, while running a surplus with some countries, and a deficit of equal size with other countries.

Impact and Response

The sharp downturn in financial markets worldwide reflects concerns that the U.S. RT will entail severe adverse consequences for the global economy, raising the spectre of stagflation. While Mauritius may benefit from lower oil and commodity prices, export prospects are likely to be further dimmed. Every effort must be made to revive exports and support our growth potential.

U.S. exports to Mauritius include agricultural and industrial machinery, precious stones and jewelry, and optical/medical instruments. U.S. imports from Mauritius include textiles and apparel, precious stones and jewelry, processed fish, primates, sunglasses, and sugar. The U.S. accounts for only about 10% of total Mauritian exports.

Around half of our exports to the U.S. consist of primates (monkeys) for pre-clinical and bio-medical testing, and the RT may affect U.S. import demand significantly, which is “putting thousands of livelihoods at risk”, according to a major primate exporter. Exports of textiles to the U.S., another major item, would also be deeply affected, as AGOA trade preferences are effectively nullified. The RT is an unwelcome shock to our export sector, which is already facing decline mainly due to a growing lack of cost-competitiveness.

It is therefore important to try to improve the RT of Mauritius relative to our competitors. Imports from the U.S. account for only about 1.5 to 2% of total Mauritian imports. Any existing import duties or excise duties on imports from the U.S. could be completely removed, with a minor impact on Govt fiscal revenue. The prospect of a modified U.S. RT would thereby be enhanced through negotiations. The Chagos deal is a definite marker of geopolitical alignment with US security interests, and should also be leveraged to obtain favorable concessions on RT.

Services Export Strategy

More critically, Mauritius must seek to diversify further into higher value-added services. In the short term, this will mean a heavy reliance on foreign skills and expertise. Focused industry-specific strategies should be developed to create an investor-friendly ecosystem supporting targeted services exports, including proper fiscal and other incentives to attract the needed foreign resources, an updated governing industry framework in line with the highest international standards, and advanced infrastructure, logistics and other facilities, etc.

New areas of diversification in financial services and the upgrading of IT services are obvious candidates for a revamped and focused services strategy. Graduating from primate exports to a life sciences services export industry also offers real growth prospects, available at hand.

While the aim of the U.S. RT is to drive foreign investors to relocate overseas production to the U.S., U.S. investors using imported goods as inputs in service productions will also have an incentive to migrate from the U.S. For example, U.S. companies relying on primates for pre-clinical testing will be inclined to shift these services abroad to suitable primate-abundant countries for testing and research, in view of the higher cost of U.S. primate imports over the medium term.

Mauritius should seize the opportunity to develop a biomedical and life sciences industry, as strongly mooted in a recent article in l’express newspaper (see Note 2). U.S. restrictions on foreign immigration are similarly leading U.S. companies to base more of their IT-related business services in India. Only decisive action to diversify and develop the services sector can enhance growth and lead us out of the middle-income trap.

Conclusion

A joint Public-Private Sector Committee should be established to assess the impact of the RT on our exports to the U.S., study all the potential options for restoring our export competitiveness, and make recommendations on our policy response. The Committee should include representatives at the highest level, namely, Govt ministers and chief executives of the concerned export businesses. Mauritius can request urgent trade consultations with the U.S. under the 2006 Trade and Investment Framework Agreement signed between the U.S. and Mauritius.

Note 1: After a RT tariff change, the decrease in U.S. goods imports should match the goods deficit, and reduce it to zero. More precisely, a decrease in U.S. goods imports following a change in tariffs, is equal to (Change in tariff rate=RT) times (Price elasticity of import demand=4.0) times (Elasticity of import prices with respect to tariffs=0.25) times (Imports), which is equivalent to (RT) times (Imports). Since the decrease in imports, i.e., (RT) times (Imports), must match the (goods deficit), (RT) is equal to the (goods deficit) divided by (Imports).

Note 2: I have a dream: Mauritius, the Life Sciences Switzerland of Africa by U. Shivraj Sohur, l’express, 30 March 2025.