This week SA’s trade relationship with the US will reach a pivotal moment when new, far higher tariffs are applied on SA goods exported to the US market.
August 1 represents the end of the pause period US President Donald Trump announced in April after unveiling the import tariffs he had decided to apply to the rest of the world. Countries that had trade surpluses with the US were classified as economic cheats that were actively abusing America’s economy.
To correct this, the US president devised a formula to determine tariffs that was as simplistic as it was impractical. In SA’s case the trade deficit of $8.9bn – SA exported goods worth $14.7bn to the US last year and imported US goods worth $5.8bn – which resulted in a reciprocal tariff rate of 60% ($8.9bn: $14.7bn), which Trump generously halved to 30%.
Beyond that, as the world digested the implications of it all, Trump initiated a 90-day pause where countries were encouraged to negotiate new trade deals with the US, with the simple caveat that such deals had to be advantageous to the US.
For SA the threat of 30% tariffs presented difficult potential consequences for sectors that have a high reliance on access to the US market. Some sectors would experience large swings in tariff rates and the immediate question would be whether the US consumer market would still buy the same volumes in light of the cost escalations.
Complicating SA’s situation is that in addition to the economic burdens Trump unleashed on the rest of the world, he harboured specific reservations about SA that were fuelled by his now-aborted bromance with SA-born billionaire Elon Musk, and a well-executed disinformation campaign that sought to capitalise on the window of opportunity of Trump’s predilection for executive orders to challenge various policy and geopolitical positions.
The expulsion of SA’s ambassador to the US, Ebrahim Rasool, at a time when more conversations and negotiations would be required, widened the schism and made the prospects of a deal ever more complicated. SA’s strategic response to the crisis was to dispatch a team led by President Cyril Ramaphosa himself to address some of the most acute aspects of disinformation; and then appointing a special envoy – Mcebisi Jonas – whose role would be to aid the bureaucrats in their quest to achieve a meeting of minds with their US counterparts.
Since then, behind-the-scenes negotiations have taken place amid the continued rollout of the Trump trade war across the world. For a variety of reasons, the negotiations have not yet resulted in a concrete proposal that both countries can sign up for.
In light of the impending doomsday, various sectors have appealed to the politicians to fast-track a solution to avoid the economic fallout. Rather than arriving at an answer, strange propositions on diversifying into new markets have emerged as recommendations from Ramaphosa and cabinet colleagues Gwede Mantashe and John Steenhuisen.
The puzzling element of the focus on pursuing other markets is that it implies such businesses have markets lined up that they can readily pivot towards. Under this theory, such businesses have largely ignored those markets as the windfall of access to the US market provided them with a comfort zone.
If that were the case, the business sector would be guilty of gross abrogation of their own responsibilities. Far closer to reality is the explanation that costs of access and the consumer buying power of those alternative markets are the true reason they cannot readily replace the US market.
Acknowledging that reality would be a good step forward for politicians as they seek to chart a way forward to minimise the looming fallout.
• Sithole (@coruscakhaya) is an accountant, academic and activist.
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