Leading economists are sounding the alarm over the fallout from a new round of aggressive trade tariffs imposed by US President Donald Trump — warning that the implications extend far beyond the US-China rivalry and now threaten to derail growth prospects for emerging markets, including SA.
The tariffs, announced on Trump’s “Liberation Day”, have sparked widespread concern that the global economy is entering a perilous phase of protectionism, fragmentation and elevated recession risk. Trump also turned his attention to SA, imposing tariffs of up to 30% — among the highest announced — on the country’s exports.
For SA, the consequences may be felt not only in lost trade but also in inflationary pressures, job losses and renewed strain on already-weak investor confidence.
“The scale of the further wide-ranging US unilateral tariff hikes … will not only drive a huge wedge into the world’s multilateral trading system, but is also bad news for the SA economy,” said Prof Raymond Parsons, professor at the NWU School of Business & Governance.
According to Parsons, the international spillover from higher US tariffs could be “disruptive of global value chains, invite retaliation, ignite inflation, dampen world economic growth and prompt repricing of risks in financial markets”.
He warned that the world economy now stands at a “fork in the road” — with the shift towards unilateral trade actions dismantling decades of co-operative trade policy frameworks and institutions.
Tariffs are taxes imposed by a country on imported goods and services.
They are typically calculated as a percentage of the product's value and paid by the importer when the goods enter the country.
The primary aim is to make imported products more expensive, thereby encouraging consumers to buy domestically produced alternatives.
While tariffs can protect local industries from foreign competition, they can also lead to higher prices for consumers and strained trade relations between countries.
— What are tariffs?
“Whatever advantages may be thought to accrue to the US economy through much higher tariffs, ‘beggar-my-neighbour’ policies have never been good news for the world economy. The collateral economic damage is usually high. All the economic evidence suggests there will be many more losers rather than winners as a result,” said Parsons.
He says some economies may potentially be brought to the brink of recession, with accompanying job losses and even social dislocation.
“Tariff uncertainty can be as economically damaging as tariffs themselves.”
Global supply chains — particularly in the automotive and agricultural sectors — are deeply interlinked. New tariffs not only make imports more expensive but also disrupt production systems that rely on inputs from multiple countries.
SA is vulnerable and exposed
SA sends less than 8% of its total exports to the US, said Johann Els, chief economist at Old Mutual. But Parsons warns that the real danger lies in sectoral exposure and uncertainty in global demand.
“High tariffs of 30% on SA exports to the US are a serious headwind,” said Parsons. “SA needs a calm and pragmatic approach driven by evidence-based homework. The automotive sector will be particularly hard hit.”
Els emphasised that tariff confusion — and the potential for additive measures — makes the outlook murky.
“There’s lots of uncertainty if last night’s tariff announcements were on top of previously announced numbers.
“So, for instance, previously SA was affected by the announcement of tariffs on all automotive exports to the US. Is this on top of that? The same with China. Is the announced 30% on top of the previous 25% — so is it 65% or 30%? [It’s] unclear, but it seems it is on top.
“It’s not a train smash in terms of the [overall] economy,” said Els, “but sectors like vehicles and citrus will be most severely hit.”
Annabel Bishop, chief economist at Investec, echoed these concerns, adding that vehicle exports and agricultural products were expected to bear the brunt of the damage.
She noted that the loss of market access under Agoa, combined with punitive tariffs, could materially harm SA’s balance of payments, narrow its current account buffer, and reduce export earnings while the country can least afford external shocks.
Perhaps the most sobering warning is that the tariff escalation could tip the US — and by extension, the world — into recession.
“These tariffs … raise the probability of the US going into recession within the next 12 months to above 60% — about 65%,” said Els. “At the start of the year, before Trump’s tariff actions, that probability was at just 10%.”
“SA must mobilise the necessary economic diplomacy to try to offset the economic damage and stabilise the situation,” Parsons urged. “Given President Trump’s reciprocal approach to tariffs, SA must see what trade adjustments might be made to win concessions to ameliorate the situation.
“SA must prudently seize the moment to begin to identify alternative markets as the US withdraws behind protectionist barriers,” said Parsons. “The African Continental Free Trade Area (AfCFTA) must be given a much higher priority.”
Els concurs: “As the Chinese example showed between 2017 and now, you do find other export destinations. Chinese exports to the US were 18% in 2017 — it’s now down to 15%. It’s not massive, but it makes a difference.”
Bishop now expects SA’s GDP growth forecast for 2024 to drop to about 1.3%, down from prior expectations of 1.8%, due to the global volatility and export risk.
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