The Eastern Cape is bracing for impact as dozens of businesses in Gqeberha are warning of looming economic strain, with fears mounting over job losses and a sharp downturn in the provincial economy, following US President Donald Trump’s announcement to raise trade tariffs by up to 30%.
On July 1, Trump announced in a letter to President Cyril Ramaphosa that he would subject SA to 30% tariffs from August 1.
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.
Among the Gqeberha businesses affected by the decision is Jendamark, with owner-director Siegfried Lokotsch described it as extremely serious.
“At Jendamark, over 85% of our business is export-based and the US is our largest market.
“This letter is a direct blow to SA manufacturers like us, who are building world-class technology, creating jobs and bringing foreign income back into the country.
“These new tariffs put all that at serious risk,” Lokotsch said.
“Our politicians need to act fast.
“If we don’t fix this relationship, it’s not just Jendamark that will feel the pain, it’s the entire South African economy.”
He said SA had for the past 24 years enjoyed negligible tariffs on its exports to the US due to the African Growth and Opportunity Act (Agoa) agreement, but this was set to change radically unless Pretoria responded quickly and positively.
“We could be looking at a 40% hike with an added 10% because of our membership of [the emerging economies forum] Brics, given what Trump has warned.”
Trump later said he would impose a 10% tariff on those aligning themselves with Brics’ “anti-American policies”.
“In that case, in real terms, the cost of every item we export to the US will rise by 40%, pricing us out of the market,” Lokotsch said.
He said SA’s current tariffs on imported US goods were slight, so it was clear the trade deficit referenced in Trump’s letter to Ramaphosa did not exist.
“The letter Trump sent us is a template which he sent to multiple countries.
“In our case, he is using this tariff hike declaration as leverage to get us to do what he has already conveyed to us are his bottom lines.
“We need to stop this ‘Kill the Boer’ chant, tighten security to protect farmers, scrap our racialised BEEprogramme, and stop engaging in anti-US rhetoric and actions.”
He said Jendamark sold assembly lines, software and bespoke industrial equipment and systems to plants in the US, employing 500 people in the Eastern Cape and 1,000 globally.
Linde Wiemann human resources manager Robin Fourie said the auto parts supplier had already been affected by Mercedes’ month-long volume adjustments temporary shutdown, imposed on July 30, and was bracing itself for the worst if the tariff hike was imposed.
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.
“In excess of 75% of our sales have disappeared and we have had to put staff on short time,” Fourie said.
“So this is a huge thing, and it will become even more difficult if the tariff hike is imposed.”
He said Linde Wiemann supplied Volkswagen Group Africa and BMW as well, but this comprised a much smaller market compared with the supply to Mercedes.
“If things get horrible, we may be forced to downsize because we need sales to keep running.
“This all applies not to just us but the many other parts suppliers in this sector as well.”
Rubicon industrial automation division managing director Dylan Schnetler said if the US tariffs were imposed, it would hurt the Eastern Cape.
Rubicon supplies automation components to several machine factory line builders, which in turn supply plants in the US.
“If our clients get hit with the 30% tariff, they will immediately be put at a disadvantage compared to their overseas-based competitors, which will affect their business and therefore ours,” Schnetler said.
He said the best way to tackle unemployment was to recognise and continuously invest in existing skills and support local companies to graduate onto the global stage.
“But instead of doing that and thereby employing more South Africans, this situation with the 30% US trade tariff will do the exact opposite.
“Unemployment will rise together with the cost of doing business and the skills exodus. There will be less disposable income, which will affect the whole Eastern Cape economy.”
He said to address the impending crisis, the SA government needed to strive for a deal that would at least reduce the 30% tariff flagged by Trump.
National Association of Automobile Component and Allied Manufacturers policy and regulatory affairs head Beth Dealtry said SA exported R28.7bn worth of automotive products to the US in 2024.
“The US ranked as the country’s third-largest export destination for automotive goods, following Germany and Belgium.
“This accounted for 10.7% of SA’s total automotive exports, a significant share that supports jobs, industrial output and the country’s trade balance.”
She said that, originally, only about one-third of SA automotive component exports to the US were affected under Section 232 measures of the Trade Expansion Act, which allows the US president to restrict imports that “threaten national security”.
“But with the latest tariff expansion, 100% of these exports are now impacted, and the impact will be felt across the value chain.
“Direct component exporters to the US are likely to see reduced demand as buyers shift to more cost-effective sources.
“In addition, suppliers within SA who support domestic original equipment manufacturers that export vehicles or integrated systems to the US may face volume reductions.
“This will put pressure on production planning, employment and investment decisions.”
Dealtry said the new tariff regime would directly increase the landed cost of South African vehicles and components in the US market.
“This would make them less competitive compared to products from countries that continue to benefit from preferential or zero duty access, such as those under the United States-Mexico-Canada Agreement.
“If these tariffs remain in place, it is expected that there will be further volume declines, job losses and reduced investment confidence across the Eastern Cape.”
Exporters Eastern Cape chair Quintin Levey said the major threat posed to heavyweight exporters such as Mercedes-Benz SA, and their link to multiple support companies, meant the 30% hike could be devastating.
He said in 2024, exports from Nelson Mandela Bay to the US totalled R5.8bn, representing 4% of the region’s total export value.
“While this may appear small, the US remains a critical market for high-value, industrial exports, particularly in the automotive sector.
“It is expected that the 30% US tariff hike will significantly impact the competitiveness of products destined for the US market.”
Levey said the manufacturing sector in Nelson Mandela Bay was already under severe stress, as highlighted by the recent announcement of the closure of Goodyear, a major employer and exporter.
“Press reports suggest that Mercedes-Benz SA, which exports almost 90% of its East London vehicle production to the US, may be reconsidering its long-term commitment to local operations if viable alternatives are not established.
“With the threat of entities of this nature closing, the knock-on effect on suppliers and support companies could be devastating.”
He said the looming tariff hike was concerning given the imminent expiry of Agoa in September — a deal vital to SA’s economy, especially for its manufacturing, automotive, agricultural and textile sectors.
SA exported vehicles, citrus, wine, nuts, apparel, steel and chemical products under this agreement.
Citrus Growers’ Association chief executive Dr Boitshoko Ntshebele said the US tariff hike would be a direct hit on export goods.
“It will make SA citrus uncompetitive in the US market.
“If some growers are indeed able to shift fruit to other markets, that diversion could very well cause a price depression, which would affect all SA citrus growers, including those in the Eastern Cape.
“Even though our US citrus exports account for only 5-6% of our total exports, it is a significant market because of its growth potential.”
Nelson Mandela Bay Business Chamber chief executive Denise van Huyssteen said simply switching markets was not a quick solution as there needed to be mutual trade benefits in place to facilitate the process.
“Exports to Brics currently generally comprise unbeneficiated raw materials and agricultural products.
“SA’s exports to the EU and the US represent greater diversity and integration, and more opportunities for job creation, which are backed and supported by trade agreements.”
The Herald
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