The US Supreme Court’s decision to invalidate tariffs imposed by US President Donald Trump gave exporters in the Western Cape little comfort, as they are still reeling from the uncertainty that shook global trade last year.
Terry Gale, chair of Exporters Western Cape, said the ruling has only created havoc in international markets due to the manner in which it has been implemented. In fact, just the opposite has transpired, he said.
“We cannot understand why the World Trade Organisation (WTO) does not take action against President Trump’s unilateral decision to impose a 10%-15% global tariff on imports, almost as a payback to the Supreme Court’s ruling.”
The US Supreme Court last week declared tariffs announced by Trump last year as unlawful, after which Trump announced a “global tariff” of 10%-15%.
Gale said the decision will not have a big impact on South African exporters except for levelling the playing field to a degree, as whatever country the US imports from, the 10% duty will be applicable.
“The question is whether Agoa [the African Growth and Opportunity Act] supersedes this. It should be noted that our exporters do not pay the 10%; this is for the account of the importer. Also, shipped delivery duty paid [DDP] when all charges to door delivery, including customs clearance [are considered], are prepaid in South Africa.”
It is difficult to estimate, as the majority of South African shipments cost freight and insurance or are delivered duty unpaid to the US, avoiding the costly reimbursement of funds for clearance at [the] destination
— Terry Gale, Exporters Western Cape chair
“Whether importers receive refunds or exporters get compensated depends on the shipping terms, which is why Gale suggests not selling [under] DDP, as then all the costs are for the account of the exporter.
“It is difficult to estimate, as the majority of South African shipments cost freight and insurance or are delivered duty unpaid to the US, avoiding the costly reimbursement of funds for clearance at [the] destination.”
White House counsellor for trade and manufacturing Peter Navarro said in an opinion editorial in the Financial Times that the court did not declare the tariffs unconstitutional and that the ruling would not stop them.
Leon Marais, associate director at GDP Global, said the ruling guides policymakers on tariff setting, who is entitled to set tariffs and under what circumstances or laws tariffs may be set.
Trump’s “immediate response to the judgment caused more confusion. Ironically, those governments that responded swiftly by negotiating trade deals with the US are now those governments with many questions.”
The abuse of power by leaders in imposing tariffs, which are subject to World Trade Organisation (WTO) rules and international commitments, raises serious legal and diplomatic concerns.
“However, it also left governments that acted promptly to negotiate trade deals with the US with more questions and uncertainty.”
It’s positive that this was struck down, but Trump remains an incredibly unpredictable person. And so the instability remains and in some ways might even be worse now, because we don’t know what … he is going to do
— Donald MacKay, XA Global Advisors director
Saul Levin, executive director of Trade and Industrial Policy Strategies, said the tariff reduction will reignite trade with the US and is a small barrier to exports.
“Exporters will, however, be wary of the US market, given recent experience, and for many, market diversification would remain a priority. The impact of the high tariff on the affected goods entering the US was a deterrent to exports from South Africa, which was its intended effect,” he said.
Donald MacKay, director at XA Global Advisors, said the US Supreme Court ruling did not restore any certainty or stability to the trade system.
“It’s positive that this was struck down, but Trump remains an incredibly unpredictable person. And so the instability remains and in some ways might even be worse now, because we don’t know what … he is going to do,” he said.
For the first time since the Liberation Day tariffs Agoa will begin to make a difference, he said.
“The average tariff into the US before the Liberation Day tariffs was 3.5%. And so on average that is how much duty you saved. Then we added the 30% on top of it. So without Agoa, we were at 33.5%.
“At the moment, everyone who doesn’t have access under Agoa is at 18.5%. But because Agoa has been renewed for another year, we’re at a flat 15%. So in fact, Agoa might again restore some measure of an advantage for African states.”
He said it is wrong to suggest exporters are entitled to refunds if the tariffs fall, as importers pay the duties.
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