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Friday, 11th April 2025

Tariffs, Aid Cuts, and Climate Shocks: A Perfect Storm for Madagascar’s Fragile Economy

By Samantha Grunow

In April 2025, the United States, under President Donald Trump, imposed a sweeping 47% tariff on imports from Madagascar as part of a broader protectionist shift. For one of the world’s least developed nations, where exports to the U.S. are a critical economic lifeline, this move could not have come at a worse time.

Madagascar depends on U.S. exports, especially textiles, making the sudden tariff hike a serious threat to its economic infrastructure. Combined with climate vulnerability and unstable foreign aid, the tariffs deepen systemic risks, endangering both development and social stability.

Economic Impact of Tariffs

Madagascar’s textile and apparel sector, the largest formal employer in the country, supports nearly 400,000 jobs and plays a vital role in poverty reduction. The U.S. has historically been a major destination for these exports, especially under the African Growth and Opportunity Act (AGOA), which previously allowed duty-free access. This new tariff, however, risks pricing Malagasy textiles out of the US market. The textile industry, which had shown resilience and growth, is now at risk of contraction. In 2023 alone, Malagasy textile exports were valued at $510 million, with 12.9% going to the U.S. These new tariffs strip away price competitiveness, threatening thousands of jobs and disincentivising future investment.

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Stitch cooperative member at work in the studio.

Beyond economic impacts, the tariffs carry broader social consequences. The textile sector has been central to promoting gender equality by creating employment opportunities for women. A downturn risks reversing gains in women’s empowerment and community resilience.

In fragile economies like Madagascar, disruptions feed into each other. Climate shocks reduce crop yields. Trade barriers limit export income. Aid cuts hinder recovery. With over 85% of the population engaged in agriculture, farmers have few options when harvests fail or export revenue drops. Even minor trade shifts can quickly trigger inflation and worsen balance-of payments deficits, reducing the government's ability to invest in infrastructure, education, and healthcare. The result is a feedback loop of worsening poverty and instability, where even a temporary tariff can cause lasting damage.

A Fragile Context Made Worse

The tariff shock comes amid rising climate stress and volatile aid flows. Madagascar is among the world’s most climate-vulnerable countries. Droughts are becoming more frequent and intense, while cyclones displace thousands and devastate infrastructure. In just the past few months, Cyclone Dikeledi and Tropical Storm Jude displaced over 30,000 people, disrupted education for nearly 50,000 students, and destroyed hundreds of classrooms. These climate disasters act as force multipliers, exacerbating existing vulnerabilities and accelerating economic strain. Food insecurity is also rising sharply. The most recent Integrated Food Security Phase Classification (IPC) analysis projects that nearly 2 million people—about 7% of the population—will be food insecure by mid-2025.

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Farmers harvesting dead crops.

At the same time, international aid has grown increasingly uncertain. With global donor attention shifting toward crises in Ukraine, Gaza, and Sudan, traditional donors such as the U.S., Germany, Sweden, the Netherlands, Belgium and the U.K. are cutting or freezing support. According to the OECD, development finance is now more politically driven than ever, leaving fragile states like Madagascar without a financial cushion during global shocks.

Political Patterns and Precarity

The sudden spike in U.S. tariffs has placed Madagascar in a precarious economic and diplomatic position. While not officially derived from political motives, the timing reflects a troubling trend. UN experts have expressed concern over the use of trade restrictions as economic coercion, especially against low-income nations. For Madagascar, shifting trade from a development tool to political leverage threatens sovereignty and diplomatic agency.

This moment echoes the country’s 2009 suspension from the African Growth and Opportunity Act (AGOA), which catalyzed Madagascar’s textile and apparel industry, employing over 100,000 workers and contributing around 8% of the national GDP by 2008. When AGOA benefits were revoked due to political instability, exports to the U.S. dropped by 70% and roughly 26,000 jobs were lost by 2010. Today’s tariffs risk similar destabilisation, but the Malagasy government has shown clear intent to protect key industries and pursue diplomatic solutions.

Interconnected Risks

Madagascar is home to over 5% of global biodiversity and sits on the frontlines of climate change. But it cannot tackle these challenges alone. Protectionist trade policies, politically conditioned aid, and climate neglect are not isolated issues, they are interconnected risks that compound one another. If trade continues to be wielded as a geopolitical tool, the Global South risks losing not just market access, but also agency. To build lasting resilience, the international community must prioritise fair trade, stable aid, and climate justice, especially for countries like Madagascar that are doing the most with the least.

A Call to Action

This moment demands a serious rethinking of how we support vulnerable nations. SEED Madagascar sees these dynamics firsthand, and our programs—spanning sustainable agriculture, climate adaptation, education, and economic empowerment—are directly impacted by this growing instability. As aid becomes more unpredictable and trade routes constrict, implementing community-based resilience work becomes increasingly difficult. Yet this is precisely where investment is most needed. Our livelihoods projects—Mahampy, Reni, Oratsimba, and Stitch are designed to build long-term resilience through sustainable, locally-driven income generation. But with Stitch currently being our only rural livelihoods initiative selling to international markets, the newly imposed tariffs make access to the U.S. market virtually impossible, threatening the economic viability of the project and the artisans who rely on it.

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A stitch artisan reviewing her work.

SEED’s broader efforts aim to buffer against these systemic shocks by building local capacity and diversifying livelihoods so that communities can weather crises more sustainably. But as global stability erodes, delivering community-led solutions becomes harder—just as the need grows more urgent. At SEED, we believe resilience must be built from the ground up. But that requires stable partnerships, predictable support, and access to fair trade. Our work continues to fight for these outcomes, but the stakes are rising.

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