In a landmark economic achievement that signals a potential turning point for the region’s global trade position, the East African Community (EAC) has recorded its first-ever trade surplus with the rest of the world in the quarter ending March 2025. This historic shift, driven predominantly by a remarkable surge in exports to China, marks a significant milestone for the eight-member bloc, which has traditionally grappled with persistent trade deficits.

The EAC, comprising the Democratic Republic of Congo (DRC), Burundi, Kenya, Rwanda, South Sudan, Tanzania, Uganda, and Somalia, collectively posted a joint trade surplus of $840 million with its global trading partners. This positive balance, a first in its recent history, is largely attributable to a sharp 66 percent rise in exports to China, which has solidified its position as the bloc’s largest trade partner. During the three-month period, EAC countries cumulatively exported commodities worth an impressive $17.7 billion to the rest of the world, a substantial 47 percent increase from $12 billion recorded in the same quarter last year. Conversely, imports from countries outside the region, despite a 5 percent rise to $16.8 billion from $16.1 billion a year ago, fell short of exports, leading to this unprecedented surplus.

This favorable trade balance has immediate and profound implications for the region. It has resulted in a net inflow of foreign currency, effectively easing long-standing foreign exchange pressures and contributing to the stabilization of East African currencies. These currencies have, for years, endured significant volatility stemming from global economic shocks, making this newfound stability a welcome development for businesses and consumers alike.

A Historic Reversal: The EAC’s Maiden Trade Surplus

For decades, the East African Community has navigated a global trade environment characterized by persistent deficits. These imbalances often stemmed from a heavy reliance on importing manufactured goods, machinery, and refined petroleum products, while primarily exporting raw or semi-processed agricultural goods and minerals. This structural imbalance meant that the region consistently spent more on imports than it earned from exports, leading to a drain on foreign exchange reserves, currency depreciation, and inflationary pressures.

The EAC’s journey towards economic integration dates back to its initial formation in 1967, and its revival in 1999, with a renewed commitment to fostering deeper economic cooperation through pillars like the Customs Union and Common Market. Despite these efforts, achieving a collective trade surplus has remained an elusive goal, often hampered by internal production constraints, limited value addition, and external market dynamics.

The $840 million surplus in Q1 2025, therefore, represents a significant departure from this historical norm. It suggests a confluence of factors, including increased global demand for specific commodities, strategic shifts in international supply chains, and potentially, improved domestic production capacities. This surplus is not merely a statistical anomaly; it signifies enhanced economic resilience for the bloc. A positive trade balance means that more foreign currency is entering the region than leaving it, strengthening national treasuries, improving governments’ ability to service external debts, and providing a buffer against future economic shocks. For businesses, easier access to foreign currency facilitates imports of essential raw materials and machinery, while for consumers, it can translate to more stable prices for imported goods.

The eight member states of the EAC each bring unique economic profiles to the bloc. The Democratic Republic of Congo (DRC), for instance, is rich in minerals, particularly copper and cobalt. Tanzania and Uganda also contribute significantly with minerals and agricultural products. Kenya, traditionally the economic powerhouse, is known for its services sector and agricultural exports like tea and coffee. Rwanda has focused on services and high-value agriculture, while Burundi, South Sudan, and Somalia are working to rebuild their economies and integrate more fully into regional trade. This diverse economic base, when effectively leveraged through regional integration, contributes to the overall strength and resilience of the EAC as a trading bloc.

The China Factor: A Strategic Diversification Play

The overwhelming driver behind the EAC’s trade surplus is the burgeoning trade relationship with China. Historically, the trade dynamics between China and many African nations, including those in the EAC, have been characterized by China exporting high-value manufactured goods, electronics, and infrastructure equipment, while importing raw materials. This often resulted in significant trade deficits for African countries. The latest figures, however, mark a dramatic reversal: EAC exports to China jumped to $5.8 billion in the period, a staggering 66 percent increase from $3.5 billion last year, while imports from the Asian economic giant rose by a comparatively measly 7.6 percent to $4 billion from $3.7 billion in March 2024. This marks the first time the EAC has recorded a trade surplus with China, signaling a potentially more balanced and mutually beneficial relationship.

This shift may have been partly influenced by the escalating US-China trade dispute, which has seen both economic superpowers impose significant tariffs on each other’s goods. The trade war, initiated by the Trump administration and continuing in various forms, has forced Beijing to re-evaluate its global supply chains. To mitigate the impact of US tariffs and ensure the stability of its raw material supplies, China appears to be actively diversifying its sourcing of key commodities. African nations, with their abundant mineral and agricultural resources, present a viable and increasingly attractive alternative to traditional suppliers.

For instance, if the US imposes tariffs on certain minerals or agricultural products from China, it incentivizes Chinese companies to source these commodities from countries not subject to those tariffs, such as EAC member states. This strategic diversification by China creates significant opportunities for African exporters, allowing them to fill supply gaps and increase their market share in the world’s second-largest economy. This geopolitical dynamic, therefore, has inadvertently created a favorable environment for East African exports, particularly for minerals and agricultural products that China traditionally imports from other regions.

Commodities in Command: What’s Driving the Export Boom?

The surge in EAC exports is not uniform across all sectors but is concentrated in specific commodity groups, reflecting both global demand trends and the natural resource endowments of the EAC member states.

• Copper and its Articles: This category saw the largest increment, nearly doubling to $6.6 billion from $3.9 billion in March 2024. This dramatic increase is a direct reflection of the Democratic Republic of Congo’s (DRC) immense mineral wealth. The DRC is one of the world’s largest producers of copper, a critical metal for the global energy transition. Copper is essential for electric vehicles (EVs), renewable energy infrastructure (solar panels, wind turbines), and advanced electronics. As the world accelerates its shift towards green technologies, demand for copper has soared. China, being a global manufacturing hub and a leader in EV and renewable energy production, has a voracious appetite for copper, making the DRC a crucial supplier. The increased exports from DRC to China highlight this strategic alignment.
• Pearls, Precious Metals, and Stones: This category also saw a significant jump, rising by 77 percent to $2.95 billion from $1.67 billion. While largely exported by the DRC, Tanzania and Uganda also contribute to this segment. Tanzania is a significant producer of gold and various gemstones, including the unique tanzanite. Uganda also has burgeoning mineral exploration, including gold. Global demand for precious metals, often seen as a safe-haven asset during economic uncertainty, coupled with demand for luxury goods, has likely fueled this increase.
• Coffee, Tea, and Spices: These agricultural staples, primarily exported from Kenya, Uganda, and Tanzania, recorded a healthy jump of $364.4 million, or 30 percent, to hit $1.2 billion over the period. Kenya is renowned for its high-quality tea and coffee. Uganda is a major coffee producer, and Tanzania also contributes significant volumes of both tea and coffee, along with various spices. Growing global consumption, particularly in emerging markets, and a renewed focus on quality and specialty products, have supported these export gains. The economist Benard Wabukala of Makerere University Business School notes that “current rains favouring agricultural production” suggest this trend is likely to be sustained in the medium term, indicating a positive outlook for the region’s agricultural sector.

This diversification of export commodities, moving beyond traditional agricultural exports to include high-value minerals, positions the EAC favorably in global trade, aligning its offerings with evolving international demand.

Navigating Global Trade Tensions: The US Tariff Conundrum

The timing of the EAC’s trade surplus is particularly noteworthy, coming “in the wake of record tariffs imposed on imports from several African countries by US President Donald Trump, which have since been paused to August 1 at least.” This introduces a complex layer of geopolitical and economic considerations.

Economists, including Phyllis Papadavid, a senior research fellow at the London-based think tank Overseas Development Institute (ODI), interpret the jump in exports as a “rush to beat a potential return of the levies.” This phenomenon, known as “brought forward” exports, occurs when businesses accelerate shipments to avoid impending tariffs, creating a temporary surge in trade figures. While exports to the US did see a steep 35 percent, or $73 million, jump during the year to March, hitting $280 million, this accounted for a mere 1.3 percent of the total rise in EAC exports. This suggests that while the US tariff threat may have played a minor role in accelerating some shipments, the primary driver of the overall surplus was indeed the surge in exports to China.

The broader context of trade tensions, particularly between the US and China, creates both challenges and opportunities for developing economies like those in the EAC. On one hand, protectionist measures can disrupt established trade routes and create uncertainty. On the other hand, they can also force global players to seek alternative markets and suppliers, as seen with China’s increased sourcing from the EAC. African countries can strategically position themselves to benefit from these shifts by ensuring competitive pricing, reliable supply, and adherence to international quality standards. However, reliance on such geopolitical dynamics for trade growth can also be precarious, as policies can change rapidly.

Shifting Global Trade Alliances: Beyond the Big Two

While China undeniably played the most significant role in the EAC’s trade surplus, the report also highlights a broader recalibration of the bloc’s global trade alliances. Exports to four of its other top trading partners – the United Arab Emirates (UAE), Hong Kong, South Africa, and India – also surged, further contributing to the positive trade balance.

• Hong Kong: Notably, Hong Kong recorded a triple growth in exports from the region in the year to March, soaring from $561.9 million in 2024 to $1.58 billion this year. This makes Hong Kong the third leading export destination for East Africa, after China and the UAE. This surge could be attributed to Hong Kong’s role as a major re-export hub for goods destined for mainland China and other Asian markets, or increasing direct demand from the region.
• UAE, South Africa, and India: These countries represent important trade corridors for East African goods, particularly minerals and agricultural products. The UAE serves as a major re-export hub and a direct market for gold and other precious commodities. South Africa is a key intra-African trade partner, while India has a long-standing trade relationship with East Africa, particularly for agricultural goods and minerals.

Conversely, the EAC also saw a notable drop in the total value of imports from some of its leading trading partners, including the UAE, India, Russia, and Germany. This decline in imports, alongside the surge in exports, was a crucial factor in achieving the overall trade surplus. This could be due to various reasons, including:

• Increased Domestic Production: EAC countries might be producing more goods locally, reducing the need for certain imports.
• Diversification of Import Sources: Importers in the EAC might be shifting their sourcing away from these countries to more competitive or accessible markets.
• Economic Constraints: Reduced import capacity due to foreign exchange shortages or weaker domestic demand could also play a role, though the overall surplus suggests easing forex pressures.
• Geopolitical Factors: The ongoing conflict in Ukraine and associated sanctions could be impacting trade with Russia and, indirectly, with European partners like Germany.

The observed decline in trade with the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) – from 8.1 percent and 6.7 percent of total EAC trade respectively, to 6.9 percent and 6 percent – suggests a strategic reorientation of trade flows. While these traditional partners remain important, the EAC’s growing engagement with Asian markets and increasing focus on intra-African trade indicates a more diversified and dynamic trade strategy.

Strengthening Regional Bonds: The Rise of Intra-African Trade

Beyond its impressive global trade performance, the EAC is also making significant strides in strengthening its internal economic ties and boosting intra-African trade. The data reveals that trade with other African countries now accounts for 27 percent of the bloc’s total merchandise trade, a notable increase from 22 percent last year. More specifically, intra-EAC trade has grown from 12.1 percent to 15.2 percent over the same period.

This growing momentum aligns perfectly with the ambitious goals of the African Continental Free Trade Area (AfCFTA), which aims to create the world’s largest free trade area by connecting 1.4 billion people across 55 countries with a combined GDP of $3.4 trillion. The AfCFTA seeks to boost intra-African trade by eliminating tariffs on most goods and reducing non-tariff barriers, fostering regional value chains, and promoting industrialization.

Economists like Benard Wabukala, a lecturer at Makerere University Business School, agree that the rise in demand for East African goods from the Chinese market has been a key factor behind the surging exports, and that the trade surplus has been “a long way coming.” He further suggests that this trend is likely to be sustained in the medium term, especially with favorable agricultural conditions. However, the long-term vision for African economies is to reduce reliance on external markets for raw material exports and instead build robust internal markets and diversified economies.

The growth in intra-African and intra-EAC trade is crucial for several reasons:

• Resilience to External Shocks: Stronger regional trade makes economies less vulnerable to global price fluctuations and geopolitical tensions.
• Industrialization: It encourages the development of regional value chains, allowing countries to process raw materials and export higher-value manufactured goods within the continent.
• Job Creation: Increased trade and industrial activity within Africa can create millions of jobs, particularly for the continent’s youth.
• Poverty Reduction: Economic growth driven by trade can lead to poverty alleviation and improved living standards.

The EAC’s progress in boosting intra-bloc trade, even amidst global shifts, serves as a positive example for the wider AfCFTA agenda, demonstrating the tangible benefits of regional integration.

Economic Implications and Future Outlook

The EAC’s first-ever trade surplus carries significant positive economic implications for the region. The easing of foreign exchange pressures is particularly critical. Many East African currencies have faced depreciation against major global currencies like the US dollar, making imports more expensive and fueling inflation. A net inflow of foreign currency helps to stabilize exchange rates, making imports more affordable, reducing the cost of servicing foreign debt, and providing greater certainty for investors.

The sustainability of this positive trade trend will depend on several factors:

• Global Commodity Prices: Continued strong global demand and favorable prices for minerals like copper and precious metals will be crucial.
• Agricultural Output: Consistent and increased agricultural production, supported by favorable weather patterns and improved farming techniques, will sustain exports of coffee, tea, and spices.
• Geopolitical Dynamics: The ongoing US-China trade relationship and its impact on global supply chains will continue to influence China’s sourcing decisions.
• Value Addition: For long-term sustainable growth, the EAC must move beyond exporting raw materials and focus on value addition. Processing minerals, manufacturing finished goods, and developing higher-value agricultural products within the region will create more jobs, increase export earnings, and reduce vulnerability to commodity price volatility.
• Infrastructure Development: Continued investment in infrastructure, including transport networks, energy, and digital connectivity, will be essential to facilitate trade and reduce the cost of doing business.
• Policy Environment: Stable and predictable policy environments, including trade policies, investment incentives, and regulatory frameworks, will attract and retain foreign direct investment.

The EAC’s trade surplus is a testament to the region’s growing economic potential and its ability to adapt to a changing global trade landscape. While challenges remain, particularly in diversifying economies beyond primary commodities and enhancing industrial capacity, this milestone provides a strong foundation for future growth. It underscores the importance of strategic trade partnerships, regional integration, and leveraging natural endowments to achieve greater economic resilience and prosperity for the people of East Africa. The coming years will reveal whether this positive trend can be sustained and translated into broader, inclusive economic development across the vibrant EAC bloc.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

29th July, 2025