ECONOMIC experts believe South Africa needs to diversify its export markets and strengthen trade relationships with other countries.
This is after US President Donald Trump announced additional tariffs on all imported products under what has been termed ‘Liberation Day’ trade measures. Goods imported from dozens of countries and territories are now going to be taxed at sharply higher rates, including 30% for South Africa.
Trump slapped several countries across the world with tariffs ranging from 10% to 73%, which will be effective from April 10.
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.
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.
Dr Ntokozo Nzimande, senior lecturer in the Department of Economics at the University of Johannesburg said the decision to impose the tariff will affect competitiveness.
"We can expect the amount of exports to decline and this will affect the economic growth. We will have to revise the economic growth further down. Our economy is not performing and therefore cannot generate enough jobs.
"The reduction in exports will result in a reduction in production because they will not be able to access US markets like they used to. Some small firms will struggle to cope and may shut down," said Nzimande.
He said South Africa should also see this as an opportunity to diversify and access other markets to supply their goods.
"It is an eye opener to not rely on one economy. We need to penetrate other BRICS partner countries. Trump is serious about everything he said in his election campaign. SA should be proactive and look at other possibilities. SA should reduce their dependency on western countries or the US. There is a lot of uncertainty in the Government of National Unity, which gives the US more ammunition and paints us as a government that has no policy direction," said Nzimande.
Dr Ernst van Biljon, head lecturer and programme coordinator M Com in Supply Chain Management at IMM Graduate School said South Africa finds itself in a particularly precarious position.
"With a 30% tariff imposed on its goods entering the US, a figure significantly higher than that of many other trading partners, the country faces a substantial competitive disadvantage. This could severely impact key export sectors, such as agriculture, manufacturing and automotive, potentially leading to job losses and economic slowdown.
"The discrepancy between the tariffs imposed on South Africa and those levied on countries like Brazil, which enjoys a 10% rate, raises questions about the rationale behind these decisions. This could lead to trade diversion, where US importers shift their sourcing away from South Africa towards countries with lower tariffs," said Van Biljon.
He said the increased trade barriers could deter foreign investment and hinder efforts to boost export-led growth.
"The long-term implications of these tariffs are uncertain. While Trump's administration argues they will level the playing field, they could also trigger retaliatory measures from other countries, escalating into a full-blown trade war. This would have devastating consequences for global trade and would particularly hurt developing economies like South Africa, which rely heavily on international trade for growth.
"South Africa needs to engage in direct diplomatic efforts to negotiate fairer trade terms with the US – particularly as regards the reciprocal 60% the US claims South Africa imposes. We also need to diversify our export markets and strengthen regional trade relationships. Simultaneously, urgent action is needed to address the country's infrastructure bottlenecks and improve its competitiveness. The timing of this announcement adds further pressure to the already troubled South African economy," said Van Biljon.
International Relations and Cooperation Minister, Ronald Lamola, said the country will continue to navigate the challenges and opportunities these measures present with resilience and innovation.
"South Africa will work to secure opportunities, in the context of rapid withdrawal of favourable arrangements giving our exports preferential access to the US. This might involve securing additional exemptions and favourable quota agreements, ensuring our industries maintain critical access to the US market, including through sectoral cooperation," said Lamola.
He added that the government will intensify efforts to diversify export destinations, targeting markets across Africa as well as in Asia, Europe, the Middle East, and the Americas.
"South Africa will leverage the Africa continental free trade area to bolster intra-Africa trade, fostering stronger regional economic integration and cooperation.
"Government is strengthening relations with countries in Asia and the Middle East to open new market access opportunities. Some efforts are bearing fruits with new market opportunities in agricultural products. The unilaterally imposed and punitive tariffs are a concern and serve as a barrier for trade," said Lamola.
Parks Tau, Minister of Trade, Industry, and Competition, said South Africa will seek a meeting with the US authorities to discuss these developments, given the potential negative effect on the South African economy.
"The Department will also engage the automotive industry to discuss implications of these developments," said Tau.
Tau said he was concerned by the decision to impose a 25% tariff on imports of automobiles and certain automobile parts to address what the US perceives as a threat to its national security.
"Automobile exports from South Africa accounted for 64% of South Africa’s exports under Africa Growth and Opportunity Act (AGOA) in 2024 and are therefore a significant component of products currently benefiting under the preferential programme. South Africa’s exports of automobiles accounts for only 0.99% of US total automobile imports and 0.27% of auto parts and thus do not constitute a threat to US industry."
He said US imports of automotive and automotive parts from South Africa was estimated at just over US$2 billion, while US exports to South Africa was over US$1.1 billion.
"While South Africa’s exports to the United States goes duty-free under AGOA; US imports into South Africa also enjoy rebates under the Automotive Production Development Programme," he said.
The South African Presidency noted with concern the newly imposed tariffs on South African exports to the US.
"Whilst South Africa remains committed to a mutually beneficial trade relationship with the United States, unilaterally imposed and punitive tariffs are a concern and serve as a barrier to trade and shared prosperity.
"The tariffs affirm the urgency to negotiate a new bilateral and mutually beneficial trade agreement with the US, as an essential step to secure long-term trade certainty," read the statement.
Meanwhile the Automotive Business Council (Naamsa) will lobby and advocate in the US for South Africa's positions, highlighting how the current policy postures of the US administration will hinder the progress made in the development of the auto sector in South Africa.
The Automotive Business Council will attend the Council meeting of the International Organisation of Motor Vehicle Manufacturers on Tuesday in Washington, DC.
Mikel Mabasa, Naamsa CEO, said they intend to use the opportunity to lobby and advocate for South African positions.
"The announcement of a 30% tariff on all South African products exported to the United States is deeply disappointing and could potentially deepen the already strained diplomatic relations between the two nations. Vehicles produced outside the US will face a punitive 25% tariff immediately, and other automotive products are now also impacted.
"While we hope the South African government will activate all available diplomatic channels with the Trump administration, these recent announcements are yet another challenge to a sector already grappling with multiple headwinds," he said.
Mabasa said the proposed tariff costs cannot be absorbed by manufacturers, resulting in additional costs for US consumers and a reduced choice of South African-produced brands.
"Urgent trade discussions must be initiated and prioritised and this is why we urge the South African government to continue negotiating and delivering solutions that support job creation, consumer demand, and economic growth.
"These tariff decisions, seen as part of a broader shift toward reciprocal tariffs, threaten to disrupt South Africa’s automotive exports and undermine our longstanding trade relationship with the US," said Mabasa.
SUNDAY TRIBUNE