CEOs see Trump tariffs, high taxes hurting growth in 2026

President Donald Trump signs executive orders in the Oval Office on January 20, 2025 in Washington, DC.[AFP]

Business leaders in the country view external shocks from US policy shifts and persistent domestic hurdles, such as high taxes, as key threats to growth in 2026, according to a Central Bank of Kenya (CBK) survey.

Even as firms bet on technology and efficiency to steady the economy, they also face these challenges.

The concerns could pose risks to private investment by businesses, hurting the prospects of new jobs at a time the country is banking on a rebound in business activity to fuel recovery after recent slowdowns. The CBK November 2025 CEOs Survey of over 1,000 executives found that nearly half (49 per cent) of firms expect to be negatively impacted by "recent US trade tariffs and policy changes."

The report stated the impact would be felt through "lower trade volumes with the US.... potential increase in import tariffs with implications on domestic production costs [and] reduced donor funding."

The expiry of the African Growth and Opportunity Act (AGOA) has dealt a significant blow to Kenyan exporters who relied on its duty-free access to the US market.

The trade preference programme, which allowed qualifying Sub-Saharan African countries, including Kenya, to export thousands of products tariff-free to the United States, lapsed without renewal by the Trump administration, immediately stripping Kenyan products of their competitive advantage.

Sectors such as textiles, apparel, and agricultural goods-which had grown under AGOA-now face higher tariffs, reducing export volumes and squeezing producer margins.

Domestically, CEOs see the "elevated cost of doing business" and "taxes and levies" as principal constraints, alongside reduced consumer demand. They identified "increased taxation" as a major factor constraining firms' expansion. "Respondents noted that high cost of doing business, taxation, reduced consumer demand, changes in US policy and tariffs, and geopolitical tensions could hinder growth," the survey's key findings stated.

Despite these headwinds, businesses are preparing to mitigate the challenges by leveraging technology and streamlining operations.

"Technological innovation and automation ... are the key drivers of firms' growth and expansion over the next 12 months," the report said. Most firms reported operating below capacity, giving them room to handle demand fluctuations. However, 83 per cent of respondents also said bank lending rates had fallen since August 2024, easing one pressure point of access to affordable credit.

Looking ahead, the strategic focus for the next three years will be on "diversification of operations, achievement of sustainable business growth, and improvement of operational efficiency," the survey found, as companies navigate a challenging landscape.

Kenya's private sector expanded at its fastest pace in over five years in November, providing a much-needed boost to workers in an economy where job creation has lagged behind growth.

The surge in business activity is now translating directly into the strongest hiring spree in over two years, offering new opportunities amid high unemployment.

The Stanbic Bank Kenya Purchasing Managers' Index (PMI), compiled by S&P Global, jumped to 55.0 in November from 52.5 in October, moving further above the 50.0 mark that separates growth from contraction. It was the highest reading since October 2020.

For workers, the report signalled a promising turn. The labour market showed clear signs of strengthening, with employment increasing for the tenth consecutive month.

The pace of job creation accelerated markedly, becoming the second-fastest since August 2023, with gains recorded across all five monitored sectors, including services, construction, and manufacturing.