The tariffs imposed by the Trump administration on SA exports to the US and a possible exclusion from the Africa Growth and Opportunity Act (Agoa) would not be as devastating to the SA economy, trade expert Matthew Stern says.
Stern is the founder of DNA Economics and has previously worked for the department of trade, industry and competition, the Treasury and the World Bank.
He was speaking in an interview with journalist Alishia Seckam during a PSG Think Big webinar.
US President Donald Trump’s intention to increase global tariffs, some by as high as 140%, has had ripple effects worldwide.
Stern said the importance of Agoa — which provides preferential access to the US market for specified products from SA and other African countries — was generally overplayed despite its strong political importance.
“In economic and trade terms it is really not that important for SA,” he said. Currently about 25% of SA’s exports to the US fall under Agoa and the preferences received were not particularly large.
Most of SA’s exports to the US under Agoa were minerals, which did not have any tariffs imposed; agricultural produce, which was admittedly vulnerable; and motor vehicle exports, which enter the US with a zero tariff but would only get a 2.5% tariff if Agoa were removed.
Motor exports would, however, be severely hit if the proposed 25% tariff were applied. The food and agricultural sector would also be vulnerable, particularly citrus.
“Agoa is not the big issue here. It has not had a major benefit for SA and so losing Agoa would not have devastating economic impacts,” Stern said, though he acknowledged that it would disrupt some suppliers.
However, the 30% tariff increase that Trump has proposed for SA’s exports to the US, excluding mineral exports, was of great concern.
Here again, however, only about 8% of SA’s total exports were destined for the US market, the third-most important for SA globally. Mineral products accounted for about two-thirds of these exports so only a select group of products would be vulnerable to a tariff hike.
“The first round impact [of a 30% tariff hike] would not be devastating for the SA economy. The much larger concern is how this plays out in the rest of the world economy,” Stern said. A trade blockage between US and China would have huge feed-through effects on global supply chains and global growth.
“The longer, larger global impacts are far more worrying than the short-term impacts this might have on SA exports to the US.”
Stern said SA had limited economic muscle in any trade negotiations with the US as it was a small market for them, with political issues likely to be a sticking point. He did not think trying to negotiate with Trump should be SA’s main trade priority at the moment.
He suggested focusing on SA's largest trading partner, the EU, to deepen trade relationships as well as on its trading partners in Africa. It was also important to think about new trading partners, particularly China and India, with which SA had strong political ties through Brics. SA had no strong trade agreements with Brics members. He advised against a tariff increase against US products as this would hurt SA consumers and was unlikely to have any positive gains.
Stern said the effects of the planned tariff increases on the world trading system would be significant, substantive and “far from fair”, though it was difficult to predict how the situation would play out in future.
Over the last 90 years, the US, he said, had been a major beneficiary of an open world trading system that had integrated countries into global supply chains.
He warned of short-term shocks to the world trading system, using the example of the possible dumping of US-produced soya beans on SA and the world market as a result of Chinese tariffs against US goods.
About half of US soya bean exports went to China. The International Trade Administration Commission (Itac) needed to monitor such developments and respond with very specific, well-targeted and justified interventions when it picked up spikes in unfair trade, Stern said.
But there would be opportunities as a result of the global shifts, he added.
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