Trump tariffs created unprecedented uncertainty — trade expert

The Citizen

30-04-2025

The trade expert said the Trump tariffs destroyed all levels of trust and confidence in the US and effectively shot the US in the foot.
US President Donald Trump's tariffs have created unprecedented uncertainty and are reshaping the global economy as his administration wields them aggressively as a political and economic tool, with South Africa among the many countries caught in the crosshairs.
Trade economist Matthew Stern, founder of DNA Economics, who previously worked for the Department of Trade, Industry and Competition, National Treasury and the World Bank, says the shocks Trump's tariffs are having on the world's trading system are significant, substantive and far from fair.
He was speaking at the latest PSG Think Big webinar, where he unpacked the erratic and far-reaching implications of Trump's protectionist policies.
'Looking at America's growth and development over the last 90 years, America has undoubtedly been one of the greatest beneficiaries of a world trading system that is open and enables and facilitates trade.'
Stern says while Trump's justification for tariffs lies in correcting trade imbalances and reviving American manufacturing, he believes the policy is as much political as it is economic. 'Trump will eliminate the trade deficit, but this will not be a good thing as it will stifle the US economy and innovation.
'Trump sees tariffs as something that he can impose on countries, whether they are friend or foe, and he sees this as a way to get leaders and countries to come to Washington, bend the knee and engage with him on a much wider variety of issues that for whatever reason aggrieve him.'
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SA not the only country suffering under Trump tariffs
Stern pointed out that South Africa's experience reflects the broader volatility created by this approach. Before the 90-day pause, the US included South African imports in a sweeping 30% import tax.
While the potential impact on overall exports is far from insignificant, the broader uncertainty it creates for investors and exporters is the real concern, he said. The US' trade with South Africa is only about 0.4% of its trade with the world, and therefore, South Africa does not have enough economic muscle to retaliate.
'The much bigger issue is how this plays out through the rest of the world economy. The longer, larger global impacts are important. They are far more worrying than the short-term impacts that this might have on South Africa's exports to the US.'
He said the International Monetary Fund's (IMF) recent downward revision of South Africa's growth forecast is evidence of this. 'This week, we have already seen the IMF halve their forecast growth rate for South Africa for the next year, from a paltry 2% to around 1%. That is a 1% cut that we cannot afford.'
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Retaliating in kind to Trump tariffs will not work for SA
However, Stern said, despite these risks, he believes retaliating in kind would be a strategic error for South Africa. 'A wide scale US-style tariff increase is not going to work for us as it will hurt South African consumers. It will provoke the beast in Trump, and it is unlikely to have any long-term positive gains.'
Instead, he advises that South Africa use a multipronged strategy that includes deepening trade ties with historical partners, such as the European Union (EU), maximising opportunities in African regional trade, and exploring new relationships with high-growth markets like China and India. South Africa does not currently have trading agreements with the Brics countries, he pointed out.
'We already have a very deep historical and strong relationship with the EU. Working with the EU to establish or deepen our existing trade relationships is a good place to start.'
Regional trade can also fill the gap, he said. 'We have a nascent free trade agreement in place across all of Africa. Investing more time and effort in dealing with outstanding obstacles to trade in Africa is equally important.'
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SA must find other opportunities with EU and Brics
There are also opportunities to be found in the disruption itself, even in the US, Stern said. 'We need to look out for spaces or products where perhaps the tariff that they impose on China is two or three times the tariff that they impose on South Africa, and it is on something that we actually produce.'
He said that despite all the challenges, this period may serve as a much-needed catalyst for introspection and self-sufficiency. 'Rather than focusing on the local market, this creates a massive opportunity to look at the region where we are in, Southern Africa and consider the real obstacles to developing regional value chains.'
Looking ahead, Stern cautioned that the US may remain unpredictable for years to come. 'We will be dealing with a much more nationalist agenda coming out of America. We already see the damage that Trump is doing not just to the world trading system, but the multilateral system in general, whether we are talking health, development, sport or trade.'
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World can control how it responds to Trump tariffs
However, he pointed out, while businesses and investors cannot control global trade policy, they can control how they analyse and respond to it.
'As businesses and investors, we must try to get a sense [of ] which sectors are going to be affected most. We must watch that carefully and in real time because they change daily.'
As uncertainty continues, Stern encourages investors to move beyond crisis response and take a forward-looking approach.
'Our analysis must also move on from the destruction and start to think about where some of these new openings and new opportunities might emerge as a result of some of these global shifts.'
While the US will now sit with a huge amount of soya beans that used to be exported to China, Stern warns that countries like South Africa must also watch out that this extra stock is not dumped here.