The language of economics is full of metaphors. Stock markets crash, assets are trapped, money supply is expressed as liquidity. But one of the most evocative images in economics is the notion of an economic shock — a sudden event that disrupts, dismays and often destroys.
Like the emotional world from which it is drawn, an economic shock can create permanent damage. The capacity to withstand shock is expressed as resilience, the ability to bounce back, or at least shift onto a more favourable path. This ability to adjust involves recognising the new reality and changing course to adapt to the new conditions.
We are undoubtedly living through a profound economic shock. The Trump tariff shock is wreaking havoc from Lesotho to Switzerland. The mighty EU is licking its wounds, and here in SA we are reeling. Like the stock market crash of 1929, or the oil price shock of 1973, the Trump tariff shock will affect the economy of every nation. Like the Covid-19 shock, it will reshape our lives in ways we haven’t yet grasped, for good and for evil.
This shock is not a one-off event but rather a rolling earthquake that generates a series of aftershocks. Of course, shock is just the response Trump seeks. In a state of fear and anxiety, his trading counterparts cave in to his demands or face the cold reality of being locked out of the world’s largest consumer market.
At first it appears that his demands are linked to ideas or allegiances, but this illusion soon disappears. Ukraine is an enemy one day and a friend the next. Russia is the darling on a Monday but a villain by Friday. India is the great new source of manufactured goods but is smacked down because it buys oil from Russia.
In reality, every negotiation is a simple calculus of power. The mighty lion with its golden mane has an insatiable appetite, and will eat anything and everything it can find even if it destroys the ecosystem.
What does this mean for SA? We find ourselves in a weak position. In truth we don’t have much that Trump wants. Our market is small by global standards and our minerals are not critical. We don’t form a crucial part of any global supply chain. Our ideas of history and development are strongly at odds with Trump’s, and while he would like us to change these, he is not going to offer much in return.
Along with many others we will find ourselves at the receiving end of a battering ram. There will also be secondary effects. Other producers that are locked out of the US will target open economies like ours. We must be agile in our responses while avoiding the temptation to close our markets and drive up prices.
The key to surviving this shock is to find new markets for our goods and services. This will be done by companies rather than the government. However, our trade negotiators must lay the groundwork through a charm offensive that unlocks access wherever it is needed. We will have to be more skilled than we have been in the past, especially when it comes to the details of trade access.
Our inability to satisfy food safety rules has long been a barrier to poultry, meat and fruit exports. Our lack of engagement with French and Portuguese speaking nations has limited our relationships. Our limited involvement with Asia has constrained us.
If we are to survive this shock and find a way forward, we must recognise our new reality and shift as quickly as we can.
• Bethlehem is an economic development specialist and partner at Genesis Analytics. She has worked in the forestry, renewable energy, housing and property sectors as well as in local and national government. She writes in her personal capacity.
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