It is hard to escape the fact that we’re on the brink of another trade war. As the US set a 90-day clock ticking for the tariffs that tanked its stock and bond markets, every finance minister was dispatched to Washington hoping to educate or appease officials under the pretext of attending the spring meetings of the World Bank and the IMF.
And SA is increasingly in America’s crosshairs. The Trump administration has not just suspended all US aid and declared ambassador Ebrahim Rasool persona non grata — it has also imposed one of its highest tariff rates against SA exporters, at 30%.
In addition, SA’s Competition Commission has proposed changes to digital market regulations, mirroring the similar Digital Markets Act of the EU. The commission’s proposal would in effect prohibit US President Donald Trump’s allies in Silicon Valley from bundling services and force them to disclose user data to rivals.
Moreover, the commission is also proposing that search engines and social media should pay punitive compensation of up to R500m a year for news content and be required to prioritise local news content.
As trade, industry & competition minister Parks Tau rushes to avoid a trade war, the Trump administration has informally outlined six issues that will guide the final tariff rate the US imposes against SA — including tariffs, regulations, or digital barriers against US exporters, tax, labour issues and willingness to invest in the US.
The commission's proposal will become another source of friction — in addition to the hefty 60% trade surplus SA runs with the US
Already during Senate confirmation hearings for US trade representative Jamieson Greer, he called out digital market regulations and competition rules against US firms as “unacceptable”.
Last week, his office confirmed it is reviewing new tariffs in retaliation for countries that impose platform laws modelled after the EU’s Digital Markets Act. These tariffs are in addition to the previous 30%.
However, Pretoria has other reasons for reconsidering the EU’s controversial regulatory model. To begin, the EU rules were Brussels’ solution to an internal problem where internet-friendly regulators in Estonia, Ireland, or Sweden would often undercut French and German attempts to protect their powerful publishing and retail industries against online competition.
Such internal rivalry is irrelevant for SA, where media barons and retail dynasties do not instruct the government to slow down digitalisation.
Digital market rules only benefit traditional retailers (who account for a much larger share of household spending) as they are not explicitly prohibited from self-preferencing, bundling, or acting as gatekeepers — though the commission has found the major supermarket chains guilty of high markups and disadvantaging small-scale farmers in an inquiry over the past two years.
The main problem with the commission’s proposal is not that platforms are rigidly regulated, as big tech might claim: the real issue is how much worse problems in traditional retail are exempt.
Also, if the EU’s experience is any indication, small businesses have lost out to non-US shopping sites and booking services. Foreign investments also decline due to legal uncertainty and the prohibitive compliance costs.
Attempts to force search and social media to prioritise or pay for news have also backfired in France, Canada and Australia, as such proposals have either solely benefited big media conglomerates or internet giants have simply blocked users from sharing local news content on their feeds, causing public backlash.
Understandably, the EU is preparing to roll back several business regulations to improve its competitiveness. Under its new mantra of “simplification”, its digital rules are scheduled to be reviewed by the end of this year.
In other words, the EU appears ready to sacrifice its Digital Markets Act in return for Trump tariffs. On April 21, Brussels issued record fines of €500m for Apple and €200m for Facebook in an obvious demonstration of its “wonder weapon”, which it offers to withdraw as a concession.
If Pretoria aligns with the EU rules that Europeans themselves plan to withdraw, it may be alone in facing countermeasures.
As US trade officials plan retaliatory Section 301 tariffs — the same tool Washington uses to bludgeon Beijing — SA could soon find itself alone in a second trade war it never needed to fight.
• Lee-Makiyama is a Brussels-based economist, trade lawyer and foreign policy commentator.
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