Alarm bells are once again sounding in the Eastern Cape after US President Donald Trump’s latest tariff decision — a move that threatens thousands of jobs and raises fresh concerns about the future of Mercedes-Benz SA.
On Monday, Trump announced that he would subject SA to 30% tariffs from August 1.
Pretoria is seeking to use the coming weeks to lobby Washington for changes to Trump’s planned tariff hike on SA goods.
The effect of the hikes would be felt first by vehicle manufacturers with export ties to the US, with knock-on effects on component exports in the Eastern Cape likely to follow in due course, according to the Nelson Mandela Bay Business Chamber.
Speaking at parliament’s finance committee meeting on Tuesday, Eastern Cape finance MEC Mlungisi Mvoko warned that thousands of jobs were at risk in a province already battling high unemployment.
More than 80,000 workers lost their jobs in the Eastern Cape in the first three months of 2025.
The jobs bloodbath has seen the unemployment rate reach a staggering 39.3% in the province, an increase of 2.7 percentage points from the 36.6% in the last three months of 2024.
It follows several consecutive quarters of declining unemployment rates.
Mvoko said the 30% tariff was a major setback for the province, especially given that just two days earlier, the department of trade, industry and competition had engaged in talks with Mercedes-Benz SA.
“You cannot imagine East London without Mercedes-Benz SA.”
Several component companies in Nelson Mandela Bay also supply Mercedes-Benz SA.
“Mercedes-Benz SA exports almost 90% of its cars to the US, and in our interaction with Mercedes-Benz SA, given these tariffs, it is going to be very difficult,” Mvoko said.
“We’re anticipating that Mercedes-Benz might leave SA.”
He said a delegation had visited the company’s headquarters in Germany, where discussions were held to try to salvage the situation.
Mvoko said during engagements, they had urged Mercedes to look for alternative markets as US markets were not guaranteed and difficult.
Mercedes-Benz SA halted production for six weeks in June and July.
However, Mercedes-Benz SA later confirmed that the production pause planned for 2025 had been extended as part of wider efforts to adjust overall output volumes.
“If Mercedes-Benz [leaves] the East London SEZ, it might be gone because half of the companies established there are suppliers to Mercedes-Benz,” Mvoko said.
He warned that a shutdown by Mercedes-Benz SA would deal a significant blow to the provincial economy, especially in light of Goodyear’s recent announcement to close its Kariega plant, a move that could result in the loss of 907 jobs.
“We also lost Bridgestone in Nelson Mandela Bay,” Mvoko said.
“Things are not good with us.
“With our high unemployment rate, this is going to contribute even more.”
After the meeting, Mvoko said the government remained hopeful that the situation would not escalate to that point as talks with Mercedes-Benz SA were still ongoing.
“We do note with concern the tariff hikes by the US government, which is the biggest export destination for Mercedes-Benz SA, and we think that decision will negatively affect production at Mercedes-Benz.”
Mercedes-Benz SA corporate affairs manager Thato Mntambo said the East London plant was focused on the production of the C-Class.
“Please understand that, in general, we do not comment on speculation about future product portfolio and production planning process,” Mntambo said.
“We are continuously assessing the impact of the introduced US tariffs on the automotive industry.
“We kindly ask you for your understanding that we won’t comment further.”
As the news broke of the tariffs, the rand and JSE showed resilience on Tuesday, with the rand recovering from Monday’s lows and stocks gaining ground as markets settled after their initial reaction to the tariffs.
SA investors are hopeful Trump may withdraw the tariffs in the coming weeks or postpone the deadline as done with his “liberation day” levies.
The US president said in his announcement on Monday that negotiations would remain open ahead of the deadline.
Additionally, Trump’s tariffs do not extend to SA’s platinum group metals (PGMs), gold, chrome and coal, which make up a significant portion of SA’s exports to the US.
Reacting to the news of the tariffs, Nelson Mandela Bay Business Chamber chief executive Denise van Huyssteen indicated that the Bay would be strongly affected due to the city’s high reliance on the automotive and agriculture sectors of the economy.
“Those vehicle manufacturers who export vehicles to the US are likely to be more immediately affected in the short term, with component exports to the US likely to be affected soon afterwards,” she said.
“Our local economy is highly reliant on the automotive industry and employs almost half of the country’s workforce in this sector.
“We are particularly concerned about the potential knock-on effect reduced vehicle assembly volumes of affected OEMs who export to the US may have on the automotive components supply chain and surrounding ecosystem.”
She said the manufacturing sector was under immense pressure due to persistent challenges with electricity supply, logistics and municipal infrastructure, compounded by an influx of cheap imports flooding the market.
“In terms of the automotive industry, cheaper imported vehicles are making inroads into the market, with consumers opting for these over purchasing from companies that manufacture vehicles locally,” she said.
“Five out of the top 10 selling vehicles in the SA market are from companies that do not assemble vehicles locally.
“These factors, together with the potential of reduced export volumes to the US, make it even more difficult for the industry to be sustainable.”
Mvoko noted that the province’s second-largest sector, agriculture, was also struggling.
“The biggest challenge with agriculture is you only have the Western side that keeps us going because the Eastern side has challenges with land.”
Commenting on this, Van Huyssteen said though only 9% of SA’s citrus exports were destined for the US — primarily from the Western Cape — the impact would still ripple through to the Eastern Cape as local producers would be forced to compete for the same markets.
“Fortunately, 70% of the season’s current citrus exports will have been processed by August, so the real effect will be felt in the next season,” she said.
“There will also be ramifications for other SA exports to the US, which may not have benefited from the African Growth and Opportunity Act (Agoa) but which will now face 30% tariffs.
“SA has historically benefited from preferential access to US markets under Agoa, but that arrangement has come under increasing scrutiny as the US seeks to realign trade relationships based on reciprocity.”
Black Business Forum president Luthando Bara saw the proposed tariff as a serious threat.
“For the Eastern Cape, the 30% tariff imposed by the US is more than just an economic policy, it is a direct threat to the social and developmental fabric of the province,” Bara said.
“While the immediate impact will be felt in key sectors like automotive manufacturing and agriculture, the ripple effects will run much deeper.”
XA Global Trade Advisors chief executive Donald MacKay said the tariffs imposed by the US might be a result of Trump trying to penalise SA.
That was despite previous diplomatic efforts by SA to normalise relations.
“The trade relations with the US are null and void. They are still open to offers ... [Trump] is using this to create some sort of urgency,” Mackay said.
The government has called on the US to provide a formal response to its trade offer and request for a 90-day extension to negotiate a new trade deal.
In a statement issued soon after Trump announced the 30% tariff from August 1, the department of trade, industry and competition said it was urgently seeking a meeting with its counterparts in the US to get clarity. — Additional reporting by Business Day
The Herald
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