SA faces economic headwinds as Trump announces tariffs
America’s President Donald Trump has announced sweeping tariffs on a range of imports, including South African goods, that will likely disrupt trade relations between the two countries.
Trump revealed a 30% tariff on South African products sold in America, as well as an additional 25% tariff on automotive imports.
The new auto tariffs are set to take effect immediately.
Economists are already predicting a major impact on South Africa's economy, particularly in its export sector.
Economist at the North West University, Waldo Krugel, told Jacaranda FM News that the new tariffs could render South African products less competitive in the U.S. market.
"The increase in tariffs makes South African goods more expensive for U.S. consumers, which will likely decrease demand for these products. As a result, our exports could see a decline, making it harder for local businesses to maintain profitability.
"We're going to see job losses and all the bad macro-economic outcomes that go along with that. So, I think South Africa is relatively diversified. We can find new markets and make plans."
While some flexibility may be found through negotiations between South African exporters and U.S. importers, Krugel believes that such an arrangement would likely result in a loss of profit for South African businesses.
For decades, global tariffs have steadily decreased, but these new measures are a sharp departure from that trend.
According to Krugel, the 30% tariff is unprecedented in recent years.
"We haven’t seen tariffs this high since the 1920s, and this could have a major ripple effect on global trade.
"Tariffs have been low for a long time now, from the late 1980s, there's been a process of tariff liberalization where countries have really been cutting down on tariffs, reducing it significantly and regular exporters these days, they are used to maybe a 3% or a 5 % tariff.
"So, 30 percent and 25 percent, those are huge numbers that no one has seen in years. I think historically, for the U.S., this is the second highest level that tariffs have ever been at."
While the immediate consequences for South Africa’s economy are concerning, Krugel noted that President Trump’s strategy often involves high-profile announcements followed by delays or exceptions to afford countries time to negotiate.
"Trump is known for using these tariffs as a negotiating tactic. There may be room for adjustments or deals in the coming weeks," Krugel added.
If no deals are reached, however, the global trade war could intensify, with other countries imposing tariffs on U.S. exports in retaliation. This scenario could escalate costs for consumers worldwide, affecting industries from agriculture to automotive.
For South Africa, industries with a high exposure to the U.S. market, such as citrus farming, wine production, and the automotive sector, will likely feel the most immediate impact.
South African citrus, wine, fruit, and nuts are major exports to the U.S., and the new tariffs could lead to job losses and a downturn in local industries.
Similarly, the automotive sector, which exports vehicle components and parts to the U.S., could see a reduction in sales.
Krugel expressed particular concern for neighboring Lesotho, which now faces a 50% tariff on its exports to the U.S.
"I really pity the people of Lesotho, who will feel the brunt of these tariffs even more acutely."
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