As the likelihood of import tariffs grows, so too does the appeal of Morocco as a “China plus One” option. Morocco has not been a big source for US importers. At the end of 2024, Morocco ranked in 73rd place as a source of US imports. At USD $1.8 billion, it was less than 0.1% of US international trade.
In 2024 US-dollar terms, the US imported:
- Twice as much from Nigeria
- Five times as much from Cambodia
- 21 times as much from Singapore
Like Morocco, none of these markets feature in the media as major sources of imports by US companies. So, what makes Morocco a source to consider?
Morocco shares the typical advantages offered by the traditional low-cost producers. But it has three critical advantages over most sources of US imports.
- Proximity to the US east coast.
- ZERO tariffs on US imports from Morocco.
- A US trade surplus.
Unlike China, Mexico, and Canada, Morocco is all but invisible to the new Administration in Washington. While the Big Three (Mexico, China, and Canada) are receiving all the tariff attention, your new opportunity may lie in North Africa.
Morocco in brief
- Location: North Africa, along the Mediterranean and Atlantic coasts
- Capital: Rabat
- Currency: Moroccan Dirham (MAD)
- Population: 37 million
- Area: Roughly the size of California
- History: Former French protectorate
- Stability: Economically and politically stable
- Historical Fact: In 1777, Morocco became the first country to recognize U.S. sovereignty.
What does Morocco manufacture?
While Morocco’s biggest industry is the mining and export of phosphate, it is active in several key manufacturing industries. Their growth is based on its history and location at the foot of Europe, only 15 kilometers away at its closest point.
1. Automotive – parts and car manufacturing.
- Manufacturing and exporting various models for Renault-Nissan, Stellantis (formerly PSA Group) and Ford.
- Huge opportunity in electric vehicle (EV) battery production. Morocco’s phosphate reserves give it potential as an EV battery production hub. A shift in underway from lithium-ion to cheaper, safer lithium iron phosphate (LFP) batteries.
2. Aeronautics – aircraft components
- Producing parts and sub-assemblies for the major aircraft and engine manufacturing companies including Boeing, Airbus, Safran, Bombardier, and Stelia Aerospace.
3. Apparel and Textiles
- Employing more than 189,000 across 1,200 companies, Morocco manufactures the full spectrum of clothing, home textiles and accessories. Clothing manufacturing extends from denim to wool, silk, lace, cotton, leather and woven knitwear.
4. Information Technology
- In addition to Morocco’s local IT and communications service providers, Microsoft, Google and Amazon each have a presence in Morocco with their focus on cloud computing.
5. Renewable Energy
- Various manufacturers produce and export parts and sub-assemblies for renewable projects in the region.
What’s driving manufacturing in Morocco?
Morocco is a low, middle-income country that has been making steady economic and developmental progress over the past 20 years. The key drivers are the same as those shared by other potential China Plus One markets:
Low Labor Costs – The Moroccan minimum wage is high relative to other North African economies. Despite this, at an hourly rate of US $1.71 it is lower than the current rate of US $2.52 in China.
Stable Political and Economic Environment – Morocco is a democracy with a regular market economy governed by a parliament and an independent judiciary.
Trade Agreements – Morocco has several key international trade agreements:
- European Union (EU): Morocco has an advanced status with the EU, allowing for preferential access to nearby European market.
- United States: Signed in 2004, the US-Morocco Free Trade Agreement (FTA) significantly enhances Morocco as a tariff-free source of imports to the US. This is Morocco’s unique selling proposition to potential US importerssetting apart from other low cost producers.
- Other Countries: Morocco also has FTAs with countries like Turkey, Egypt, Jordan, Tunisia, and the United Arab Emirates.
Morocco Industrial Acceleration Zones (IAZs) – Known as free trade zones in other markets, Morocco has ten key industrial acceleration zones. Like free trade zones elsewhere, they are set up to attract foreign investment and drive economic activity.
The IAZs are spread across Morocco. Those in the north, east, and central Morocco tend towards specialization. This is based on geography – the established larger cities of Rabat, Casablanca & Tangier, with their proximity to Europe and higher populations. The southern IAZs have a narrower focus on agriculture and aquaculture.
If you are considering establishing a manufacturing operation in an IAZ, they offer:
1) Corporate Tax Relief
- Total exemption from corporate income tax for the first five years and application of a 20% rate for subsequent fiscal years following the 5th year of total exemption.
- Exemption of dividends and other similar participation income from foreign sources when paid to non-residents.
- Exemption from value-added tax, with the right to deduct delivered products and services rendered to IAZs as well as operations carried out within or between said zones.
- Exemption from business tax for the first 15 years for buildings and equipment.
2) Local Supply Chain Support
- Banking
- Recruitment
- Warehousing and transport
- Office rental
- Zone administration services
Opportunities and Challenges in Manufacturing in Morocco
Potential US tariffs
The potential for targeted import tariffs against Morocco is low. The new Washington Administration views the US trade balance as a scorecard for the international trade game.
- When it’s a positive number, US exports exceed imports. The US is winning.
- When it’s a negative number, US imports exceed exports. The US is losing.
At the end of 2024, the US had a trade surplus with Morocco. The US is winning the game against Morocco.
Morocco’s critical dilemma
There is intense interest from Chinese EV manufacturers eyeing Morocco as a hub for Chinese EV production. This is driven by Morocco’s well-developed automotive industry and phosphate mining. While Chinese interest presents economic opportunities, it risks jeopardizing its tariff-free access to the US market and drawing increased scrutiny and potential pressure from both the US and EU.
Morocco needs to tread carefully if it is to maintain its relationship with the West and capitalize on the opportunity of a deeper relationship with the East (China). If it takes one wrong step, it risks its economic and political independence as it will become caught up in the brewing US-China trade war.
Logistics: Morocco to the US
At the foot of Europe on the north-west tip of Africa, Morocco lies across the North Atlantic Ocean to the east of the US.
Key international shipping ports linking directly to Europe and the US are:
- Tanger Med (MAPTM)
- Casablanca (MACAS)
- Adagir (MAAGA)
Both the cost and lead time of sea freight shipping compare favorably to China. In addition to the tariff-free Moroccan import, the freight saving is 20%, and the time taken is almost half.
Airfreight offers another advantage for Morocco.
- China to Los Angeles (LAX) is 8,700 km at 15-17 hours.
- Morocco to New York (JFK, LGA, EWR) is 6,300 km at 11-15 hours.
Intellectual Property Rights Protection in Morocco
Morocco has a comprehensive regulatory and legislative system for the protection of intellectual property. Morocco is a member of the World Intellectual Property Organization (WIPO) and party to several other international agreements and conventions dedicated to the protection of intellectual property, including:
- The Berne Convention for the Protection of Literary and Artistic Works,
- The Paris Industrial Property and Universal Copyright conventions,
- The Brussels Satellite Convention, and
- The Madrid, Nice, and the Hague Agreements for the Protection of Intellectual Property.
For US importers, there is further protection through Chapter 15 of the US-Morocco FTA. Chapter 15 provides for the protection and enforcement of intellectual property rights. It aims to create a fair and competitive environment for businesses and innovators in both countries.
How do import tariffs compare?
Under the US-Morocco FTA, a US importer of manufactured goods from Morocco pays no tariff upon arrival to the US (January 2025). Quotas do exist on US imports of certain agricultural products from Morocco.
It is anyone’s guess as to how long this will remain the case. The longer Morocco maintains:
- The FTA with the US
- Low in the import source rankings
- A trade deficit with the US (i.e. while “the US is winning”)
The greater the chance the tariff advantage will remain.
Is Morocco for you?
Morocco offers US importers a real opportunity to diversify their supply chains and avoid the risks associated with potential tariffs and over-reliance on China. With its proximity to the US, competitive labor costs, and a tariff-free US—Moroccan FTA, Morocco offers a compelling “China Plus One” option.
Potential challenges exist, including competition from other emerging markets, and the changing nature of US-China trade relations. Solid research into the capability of potential manufacturers and then building strong partnerships with them is crucial for an importer seeking to successfully source from Morocco.
