President Donald Trump’s next tariff deadline of August 1 now looms for South Africa, as it does for many other countries. Considerable analysis has already gone into what a worst-case scenario might look like if an interim deal is not struck in time, and how to buy time for further negotiations.
To add insult to injury, the African Growth & Opportunity Act (Agoa), which grants African exporters duty-free access to the US market, expires on September 30. There has also been controversy as to whether South Africa has played the cards it holds as skilfully as it should have, given the White House’s sentiment towards it.
While the cumulative impact of these negative developments for South Africa falls mainly on agriculture and the motor industry, the broader macroeconomic implications should not be underestimated. Reserve Bank governor Lesetja Kganyago has warned of the potential loss of 100,000 jobs if the tariff situation should go “pear-shaped”. And this all comes at a time when South Africa’s incipient economic recovery is struggling to gather momentum to improve on an expected GDP growth rate of only about 1% in 2025, and with the GNU having set a growth target of 3% in the medium term.
Where does accountability for the situation begin and end? Former US president Harry Truman had a sign on his desk in the White House: “The buck stops here.” In his farewell address in January 1953, Truman reiterated this commitment: “The president, whoever he is, has to decide. He can’t pass the buck to anybody. No-one else can do his deciding for him. That’s his job.”
These admirable thoughts about high-level decision-making have frequently been echoed, both globally and domestically, but they may need to be reworked for navigating today’s increasingly complex geopolitical arena.
Realistically we certainly now need to brace ourselves for less access to the US market and need to evolve shock-absorbing strategies to deal with it
Of course, political responsibility for integrating South Africa’s national economic interests with foreign policy in rapidly changing circumstances cannot be evaded. But the immediate challenge that South Africa faces in negotiating with the current US administration is complicated by the fact that the agenda is not purely a trade one; it also (as in the case of Brazil, for example) centres on domestic policy and national politics.
This raises the bar as to what trade-offs may be feasible to stabilise and consolidate future economic relations. Realistically we certainly now need to brace ourselves for less access to the US market and need to evolve shock-absorbing strategies to deal with it in collaboration with the private sector.
The agenda also touches on South Africa’s wider reality as a not-insignificant player on the continent and the intra-African commitments and interdependence that now exist. Africa and South Africa will therefore collectively need to employ their leverage. This includes expediting implementation of the African Continental Free Trade Area (AfCFTA) agreement and harnessing existing regional alliances and strengths.
What are the immediate economic diplomacy options in the wake of the aggressive but erratic US tariff policy? The first (but unlikely) prize would be to successfully engage in last-minute productive negotiations to avoid the tariff guillotine of 30% falling on key exports to the US from August 1.
In any event, South Africa’s diplomatic capacity in the US should be up to full strength for the daunting task that lies ahead. A few large and small countries that have so far succeeded in negotiating a mitigating tariff deal with the US have demonstrated valuable levels of agility, adaptability and adroitness in spreading risks.
South Africa, a small open economy, must also employ these characteristics if it is to manage the real risks and potential opportunities embedded in a greatly changed global order, fuelled in part by the growing influence of Brics and China. South Africa must be a smart operator as well as remain globally competitive to ensure it is not priced out of markets.
As a new type of globalisation takes hold, with different drivers and rules, countries are having to engage with it in subtler, more nuanced ways. South Africa’s foreign, trade and growth policies must therefore be reimagined and capacitated in a manner that ensures that the tangible benefits of economic diplomacy are visible to the country.
For South Africa therefore to be multi-aligned in a world in which diversification is now at a premium presents a formidable challenge. It must forge a new delicate balance between adaptability and steadfastness, implementing astute policies that build confidence in its capacity to get the best of most worlds.
• Parsons is a professor at the North-West University Business School
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