Trump's 30% tariffs on South African exports take effect

The significant shift in international trade dynamics took effect on Wednesday as new tariffs imposed by United States President Donald Trump on various South African goods come into play.

The introduction of these tariffs is a continuation of a trend that has been felt across the globe, especially for countries engaged in trade with the US.

South African businesses that rely heavily on exports to the American market now find themselves navigating new financial landscapes as the costs of tariffs could potentially escalate, impacting their profit margins and competitiveness.

When Trump announced the new tariffs last week, South Africa was placed in the category labelled “worst offenders” and hit with a 30% tariff on exports to the United States.

While many countries across the globe mobilised in reaction to Trump's tariffs, with 50 countries approaching the White House to negotiate for lower tariffs, others such as China doubled down in protest against the American tariffs, which led to further punishment from Trump on the Asian country, increasing the tariff percentage. 

Meanwhile, closer to home, South Africa and its government adopted a wait-and-see approach as the government said it was willing to negotiate further with the US. 

South Africa exports a variety of goods to the US, and as the tariff adjustments take effect, these industries are preparing for the ripple effects that could follow.

The sectors most affected will likely include agriculture, textiles, and electronics.

South African trade officials are mobilising efforts to safeguard local industries and mitigate the negative impact of these tariffs. Strategies include seeking alternative markets and enhancing trade relationships with other countries, particularly within Africa and other regions where tariffs are less stringent.

The South African government is hopeful that through diplomatic channels and trade negotiations, a resolution can be reached that benefits both nations' economies.

As South Africa steps into this new trade era marked by tariffs, businesses and consumers will need to remain vigilant and adaptable. Understanding the implications of these changes will be crucial for navigating the evolving market landscape.

Old Mutual Group chief economist, Johann Els, said that from the South African perspective, direct trade exposure to the US was relatively limited.

"While US data indicates a $9 billion trade deficit (equivalent to 2% of SA’s GDP), local figures suggest a more modest $2bn gap. Precious metals, base metals and vehicles comprise the bulk of SA’s exports to the US, with precious and some base metals notably exempt from the new 31% tariff rate,"Els said.

"Imports from the US are concentrated in machinery, electrical goods and chemicals. As a result, the macro-economic impact on South Africa will likely be felt more acutely in specific industries, like agriculture and vehicle manufacturing, rather than across the broader economy."

Els also downgraded his growth forecast marginally in response to expected softness in US-linked exports. He said he did not foresee a local recession.

"China and the Euro Area, South Africa’s primary trading partners, are expected to adopt accommodative policy stances, which should help offset lost momentum,"he said.

"Inflation risks have also shifted to the downside, supported by stable oil prices and a potentially firmer rand. If inflation dips below 3% in Q2 and the global rate cycle turns, the SA Reserve Bank may find room to begin cutting interest rates from mid-year."

BUSINESS REPORT