US president-elect Donald Trump’s decision to roll out tariffs on imports from Mexico and Canada — two of America’s longest-standing and biggest trading partners — is a sign of things to come.
The tariffs will directly undermine the profitability of nickel exports from Canada, the biggest supplier of the nickel alloys that are essential for the US defence sector. Canada supplies about 50% of America’s total nickel consumption.
As there are no nickel refineries in the US, it depends entirely on imports. A 25% tariff on Canadian nickel will displace its exports from the US, which will have a direct effect on SA markets.
US buyers are now likely to switch to buying oversupplied, underpriced Indonesian nickel, most of which is produced by Chinese companies. It’s only a matter of time before Indonesian imports are also hit with tariffs.
While the US is not the biggest importer of SA’s minerals, it is within the top 10. Trump’s America First agenda — and inevitable tariffs — will therefore sooner or later also affect SA’s exports to the US. SA accounts for the largest share of several American mineral imports, the US being SA’s biggest trade partner after China.
In order of value, the SA export basket to the US looks like this: 36.5% platinum, 4.7% gold, 4.2% ferro alloys, 2.2% diamonds, 2.4% aluminium and 1.6% nickel. Together, these amount to 51.2% of our commodity exports.
The new tariffs stand to protect the US’s only platinum mine, which is owned by Sibanye-Stillwater, ironically an SA firm, where a loss of commercial competitiveness recently resulted in 700 layoffs.
Palladium is one of the most important metals in the platinum group metals (PGMs) basket. The total cash cost for mining an ounce of palladium at SA’s Mogalakwena is $590, compared with $1,032 per ounce at Sibanye-Stillwater’s US operation. That is higher than the current selling price of palladium, so it’s no surprise that the recent retrenchments took place.
SA mining firms — especially PGM companies — would do themselves a favour by finding new export partners. The US is the second-biggest buyer of SA PGMs, taking 20.7% of SA’s supplies. This is considerably more than the third-biggest off-taker, the UK, which buys 12.3% of SA’s PGMs.
The tariffs will also clearly be bad for the US. Globally, it is the biggest importer of platinum, buying 18.5% of global supplies. China imports 9.1% of the global supply. As an American, it’s clear that this is an ill-considered move. PGMs are the bedrock of a number of sectors, particularly the US automotive industry, a vital sector for the US economy and highly labour intensive.
I founded the only critical minerals programme in Washington DC this year — and at one of the few truly non-partisan institutions. A large part of my job is to provide objective policy guidance to policymakers. This move doesn’t make sense, objectively.
It is evident that Trump’s America First agenda is not prioritising the competitiveness of vital industries by keeping mineral inputs affordable for key industries. I am curious to see how this plays out with American consumers. Trump’s Republican Party also prioritises debt management, and the new tariffs stand to cost the fiscus a significant amount if the government needs to bail out critical industries.
General Motors alone lost $40bn in 2007 and $31bn in 2008. The then president announced a $17.4bn bailout for American car firms, $13.4bn to be provided immediately. The bailout saved
1.5-million jobs.
Will Trump have to roll back some of these tariffs? Maybe. But SA is unlikely to be a priority compared to Canada.
• Dr Baskaran, a development economist, is founding director of the Project on Critical Minerals Security at the Centre for Strategic & International Studies in Washington, DC.
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