Finding alternative markets for South African exports under threat from US President Donald Trump’s tariffs is not a panacea for all sectors, and the country might have to consider imposing stricter protection measures to shield local industries such as steel from products dumped by countries with excess stock.
The South African Iron and Steel Institute (Saisi) said this week that seeking alternative markets for local steel could trigger a regional oversupply crisis as the industry continues to battle with imports from markets such as China.
Saisi head of stakeholder relations Mabel Matlala told Business Times the concern for the steel industry lies in potential trade diversions triggered by escalating and retaliatory protection measures.
“It is likely that surplus steel will be redirected to less protected markets like Africa, intensifying oversupply pressures particularly in open markets such as South Africa, which lacks protective measures like those in the EU and India.”
Early this month, Trump imposed a 31% tariff on US imports from South Africa, but later announced a 90-day pause. He kept a 10% baseline tariff on all imports and higher targeted duties on China, whose exporters face 145% tariffs on goods sold to the US market.
Matlala said Saisi had reached out to the International Trade Administration Commission (Itac) to ask for urgency in allowing South Africa to implement stricter trade measures to fend off distressed exports from surplus production, especially from China.
“We have notified Itac that, in view of them giving almost the whole industry an extension for submitting input to the tariff review request until May 2, Saisi will submit its response only by then, even though we were ready to respond on the 16th of this month.
“Complying with the submission date of the 16th would make our response public for all the others to react to, which would be an unacceptable situation for the steel producers. Therefore, we will only share our submission after May 2.”
She said US-China demand constraints could drive down global steel prices, further impacting South Africa’s market. Excess capacity without corresponding steel demand would add more than 700Mt by 2027.
“Due to the massive oversupply globally, [there will be] more downward pressure on steel prices, with expectations that they might even dip below the global average cost of production.”
She said the weaker rand raised costs for imported raw materials such as iron ore and coal, eroding local manufacturers' price competitiveness, with the exchange rate expected to remain volatile at between R18.25 and R22.46 per dollar this year.
Protectionist tools that were previously completely taboo are no longer taboo
— Adrian Fielding, ACF director
Securing a bilateral trade deal with the US could be a tall order given Trump’s repeated attacks on South Africa since his return to the White House in January, she warned.
Addressing reporters at a virtual briefing to unpack next month’s Africa CEO Forum (ACF) in Abidjan, Ivory Coast, ACF director Adrian Fielding said a new agreement was needed between African governments and the African private sector to respond to trade volatility.
“Protectionist tools that were previously completely taboo are no longer taboo. They are on the table amid a huge global power play by powers across the world.
“What this results in for the continent is that power does matter [in terms of] mercantile wealth. And so there’s really no choice for African nations and Africa as a whole [other than] to deploy their own superpower, which we claim to be the African private sector ... to advance African interests in such a transactional context.”
Peter Armitage, CEO of Anchor Capital, said while Trump shocked global markets with his “reciprocal” tariffs, markets had hit back in several ways, prompting the president to pause the tariffs days later, leaving businesses in an environment of uncertainty.
“If people have to pay more for their imports because of the tariffs, that will result in higher inflation. Higher inflation results in higher interest rates, and that typically results in lower valuations ... because if inflation is higher, the value of a dollar in a few years’ time is worth less than if inflation was lower.”
The South African Reserve Bank’s monetary policy review for April warned that escalating trade tensions and geo-economic fragmentation, reflected primarily in rising tariffs, had raised global economic policy uncertainty to levels last seen during the Covid pandemic.
“The risk of disruptions to global supply chains and broader trade policy uncertainty has increased sharply, offsetting the cooling effects of weaker job growth on inflation. For the first time in several years, the risk that disinflation at a global level will stall, if not reverse, has increased sharply.”
The review said market views of risk and short-term rate expectations had shifted higher, and recession risk had increased, as higher tariffs on global trade carry the potential for much weaker economic growth.
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