NMB Business Chamber calls for urgent mitigation after devastating US tariff announcement

Daily Maverick

a day ago

The Nelson Mandela Bay Business Chamber has described the 30% export tariffs levied on South Africa by US President Donald Trump as a 'direct blow' to local exporters.
Roleplayers from the Automotive Sector, the components manufacturing sector and Nelson Mandela Bay's Business Chamber have called for urgent government action to mitigate the 30% tariffs imposed on South African exports by United States President Donald Trump.
The move is likely to cause devastation to an already fragile Nelson Mandela Bay economy – the strongest economy in the Eastern Cape.
'We are extremely disappointed with US President Donald Trump's announcement of yesterday that he will subject imports from South Africa to 30% tariffs, effective from 1 August.
'This is a direct blow to local exporters who manufacture products according to world-class standards and employ thousands of people. There will be wide-ranging implications for South African exporters, with Nelson Mandela Bay being disproportionately impacted due to our high reliance on the automotive and agriculture sectors of our economy,' Chamber CEO Denise van Huyssteen said.
'[The South African] government must move with absolute urgency to implement emergency measures to protect local exporters and the thousands of jobs linked to this. Potential mitigation actions could include still trying to find ways to establish mutually beneficial trade relations with the US to reduce the tariff burden, securing alternative markets for our products by negotiating with BRICS markets for Free Trade Agreements, strengthening trade relations with the European Union and South East Asia markets. However, it needs to be noted that switching markets takes a long time and is not something which can be done in the short term,' Van Huyssteen said.
Eastern Cape economy
According to an analysis from the Eastern Cape Development Corporation for Q4 of 2024, the decision from Trump comes as exports from the province were already in decline, by 22% at the end of 2024. The top four provincial export commodities are motor vehicles, wool and mohair.
Competitive advantage
Van Huyssteen said several countries would now have significant cost advantages over South Africa, including others in Africa, while Japan and Korea may have the flexibility to absorb the tariffs.
'This will put South Africa, which already from a logistics perspective [is] far from other markets, in a very uncompetitive position versus other countries around the globe, and on the African continent. There is no doubt that this will have a direct impact on the global strategies and decisions of multinationals on where the best manufacturing locations may be,' Van Huyssteen said.
Retaliation tariffs
She said other potential issues which might arise included other countries reducing their tariffs to the US, and SA exporters having to compete with these tariffs; retaliation tariffs from our current trade partners and the dumping of products in our market by other countries which can no longer compete in the US.
'An example of this is the impact of cheap tyres entering the country through anti-dumping loopholes, affecting the ongoing viability of local tyre manufacturing,' Van Huyssteen said. Goodyear Tyres announced last month that it was shutting down its manufacturing plant in Kariega. It is expected that around 900 people will lose their jobs. Earlier this year, Continental Tyres closed one of its specialist tyre factories.
'The United States is South Africa's second-biggest trading partner and is the automotive industry's second-biggest export market. The industry has for a number of years benefited from duty-free benefits under Agoa, but this has now permanently ceased,' Van Huyssteen said.
'The automotive industry requires economies of scale to be competitive and the South African industry only represents 0.6% of global vehicle production. By far the biggest risk in the short term to the medium term is the competition that South Africa will face from non-US manufacturing countries which may have a lower tariff base.
'Furthermore, those vehicle manufacturers who export vehicles to the US are likely to be more immediately impacted in the short term, with component exports to the US likely to be impacted soon afterwards.
'Our local economy is highly reliant on the automotive industry and employs almost half of the country's employment in this sector. We are particularly concerned about the potential knock-on impact of reduced vehicle assembly volumes of affected OEMs (original equipment manufacturers) who export to the US may have on the automotive components supply chain and surrounding ecosystem.
'Manufacturing is currently under immense pressure brought about by the electricity, logistics and municipal infrastructure challenges of the past few years, as well as the influx of cheap imports into the market. In terms of the automotive industry, cheaper imported vehicles are making inroads into the market, with consumers opting for these rather than purchasing from companies that manufacture vehicles locally.
'In fact, five out of the top-10-selling vehicles in the SA market are from companies that do not assemble vehicles locally. These factors, together with the potential of reduced export volumes to the US, make it even more difficult for the industry to be sustainable.
'The ecosystem linked to the automotive industry generates thousands of jobs from the vehicle manufacturers and components manufacturers, right through to the many medium and small businesses providing indirect services such as cleaning, security, IT and various other support services,' Van Huyssteen said.
She said the agriculture sector, which like the automotive industry has benefited from Agoa, would be directly affected.
Agriculture
The Eastern Cape is the country's second-largest citrus-producing province, but does not export to the United States. There are concerns, though, that other citrus-producing areas will now compete for the Eastern Cape's export markets.
Requirement for mitigation
The Eastern Cape as a whole is likely to be disproportionately affected by the tariff announcements versus the rest of the country, given the extent to which its economy is anchored by the automotive and agriculture sectors.
'Speed and a proactive strategic response are required to enable South African-based manufacturers to find alternative solutions to navigating the fast-changing landscape and implementing mitigation actions,' Van Huyssteen said.
Components manufacturing
The CEO of the National Association of Automotive Component and Allied Manufacturers, Renai Moothilall, said the confirmation of the additional duties in the US market to be applied from 1 August were of great concern in the automotive sector.
'We are already seeing volumes of vehicle assemblies linked to those markets being reduced and the impact on the supplier base is negative. Having noted the content of President Trump's statement, Naacam urges a nuanced and urgent negotiation which highlights the positive trade relationship that the US enjoys with SA in terms of components coming from that country to be used in vehicles which are then exported back to the US,' he said.
Automotive Business Council
While he has not yet responded to the confirmation of the 30% tariff, Mikel Mabasa, CEO of Naamsa, the Automotive Business Council, said last month that the United States was the third-largest destination for South African automotive exports, with about R35-billion worth of vehicles shipped in 2024, accounting for 6.5% of total vehicle exports in 2024.
'The proposed 25% tariff increase will severely impact local manufacturers operating in South Africa, including BMW, Ford, Isuzu, Mercedes-Benz, Nissan, Toyota, and Volkswagen, who produce vehicles for global markets, including the US.
Last month, while attending the Gauteng Investment Conference in Johannesburg, Mabasa said it could have serious implications for jobs in South Africa as the SA auto industry contributed significantly to economic development, employment and industrialisation.
On Tuesday afternoon, he said that the council would meet on Tuesday night to discuss the new tariffs. DM