Trump's new 30% tariff less about trade and more about power

The Citizen

11 hours ago

US president Donald Trump followed through on his April threats and hit South Africa with a 30% tariff.
Economists say there is not much new about US President Donald Trump's new 30% tariff, which will be levied on all goods imported into the US from South Africa. It is not so much about trade as it is about power.
Trump confirmed the move in an official White House letter to President Cyril Ramaphosa and also hinted that a new trade deal could be reached before August.
Dr Neva Makgetla and Nokwanda Maseko, senior economists at Trade & Industrial Policy Strategies (TIPS), say there is nothing different from the previous tariff announced in April/May, which reflects a notoriously flawed methodology that has very little to do with the real world.
'In practice, South Africa, like the rest of the world, has already been hit by 25% tariffs on autos, which affect the largest South African export to the US apart from mining products.
'This is perhaps less about trade and more about a show of power. The argument that South Africa imposes unfair trade restrictions on the US is unfounded. If it were, South Africa might have been excluded from the African Growth and Opportunity Act (Agoa) years ago.
'South Africa accounts for less than half a percentage of total US imports, but accounts for about 7% of total South African exports.'
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Automotive Business Council still reviewing Trump's letter
When approached for comment on the tariff, Mikel Mabasa, CEO of the Automotive Business Council (naamsa), said naamsa is still reviewing the contents of the letter and talking to its members before he will comment.
Just after the first announcement in April, Mabasa said the US is the third-largest destination for South African automotive exports, with approximately R35 billion worth of vehicles shipped in 2024, accounting for 6.5% of total vehicle exports in 2024.
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Looming tariff causing uncertainty
The tariff will also affect the citrus industry although South Africa only exports about 5% to 6% of its citrus to the US, as many rural communities in the Western and Northern Cape heavily depend on US exports.
Dr Boitshoko Ntshabele, CEO of the Citrus Growers' Association (CGA), says the looming US tariff creates great uncertainty among many South African citrus growers.
'It will make South African citrus uncompetitive in the US. The threat of a punitive US tariff means that many of our growers are unable to plan for the entire season, which will only end in October.'
Only citrus from the Western and Northern Cape is exported to the US, but entire rural economies, like that of Citrusdal, are sustained by the US export citrus market. Ntshabele says a 30% tariff would wreak havoc on entire communities.
'Producers from the Western and Northern Cape would have little choice but to increase shipments to other countries, rather than face severely diminished returns from the US. This diversion will add to citrus volumes in those other markets, possibly cause an oversupply, which can substantially reduce returns for all South African citrus producers.'
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Mutually beneficial trade deal still possible
He says the CGA believes that a mutually beneficial trade deal between South Africa and the US by 1 August is possible or, at least that an exemption for seasonal fresh produce can be negotiated. 'Seasonal fresh produce is not like a product produced year-round in a factory. SA citrus growers do not threaten US citrus growers or US jobs.
'In fact, because we are counter-seasonal, quite the opposite is true. Our produce sustains interest when local US citrus is out of season, eventually benefitting US growers when we 'hand over' consumers at the end of our season.'
Ntshabele says with a massive increase in local citrus production projected for the next few years, the local citrus industry can create no less than 100 000 jobs by 2032, but this cannot be done without improved market access and new markets.
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US trade negotiations will affect GDP forecast
Jee-A van der Linde, senior economist at Oxford Economics Africa, says South Africa's existing supply-side constraints will exacerbate the impact of US tariffs on domestic exporters. 'Given South Africa's frail economy, businesses can also ill afford defiant posturing from the government and retaliatory measures are therefore considered unlikely.
'The disruptive and unpredictable nature of US trade negotiations means that our below consensus economic growth forecasts for South Africa will remain unchanged until there is further clarity on US tariffs.'
However, he points out that the rand has steadied since the announcement, as markets seem to expect Trump's on-again, off-again tariffs to remain true to form. 'Naturally, the higher tariffs on South African goods will inflict more economic damage than the current rate of 10%, which is burdensome for domestic businesses who have relied on duty-free access to the US for years.'
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Trump's letter about tariffs both reassuring and concerning
George Herman, chief investment officer at Citadel, believes that the letter from Trump about the tariffs is both reassuring and concerning. 'On the positive side, it is encouraging that the update is no worse than what was outlined on 2 April. The vague language also leaves the door open for further negotiations and the original deadline of 9 July has now been extended to 1 August.
'However, it is difficult to see what bargaining power South Africa holds, especially given US Trump's negatively biased view towards SA. President Cyril Ramaphosa immediately responded by refuting claims of the tariffs that South Africa places on the US and urging local exporters to diversify their customer base beyond the US. While strategically sound, this is not an easy shift to make in the short term.'
He says it is evident that no real progress has been made in negotiations with the US over the initial 90-day period and this signals a tougher trade environment with the US in future. Herman warns that this can also affect interest rates.
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New tariff will have major impact on economy
Bianca Botes, director at Citadel Global, also believes the new tariff will have a major impact on the economy. 'Key sectors such as automotive, steel, agriculture and manufacturing will struggle to compete in the US market, which could lead to lower export volumes and job losses, especially in areas that depend heavily on trade with the US.
'With exports expected to decline, gross domestic product (GDP) growth may slow and both businesses and workers could see reduced incomes. This in turn would likely dampen consumer spending and investment. Higher costs, supply chain disruptions and added inflationary pressure may add to the strain.'
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Potential negative economic impact of tariff should not be underestimated
Prof Raymond Parsons, economist at the NWU Business School, says the US tariff decision is not good news for the South African economy and its potential negative economic impact should not be underestimated.
'While not unexpected, it creates a challenging economic headwind for SA. For now, the most difficult areas for SA, such as agriculture and cars, remain badly affected unless last-minute negotiations can still ameliorate the outcomes by 1 August.
'The global reality is that the aggressive US tariff policy is creating a fragmented world trading system that further elevates economic uncertainty. While there is a great deal of fear psychology about just now, South Africa is not without remedies.
'As a small open economy, it remains essential that bilateral negotiations must continue to stabilise and consolidate future US-SA investment and trade relations. Collaboration between government and the private sector to accelerate the identification of alternative markets must continue.'