US President Donald Trump’s 90-day pause on sweeping “reciprocal” tariffs on imports from around the globe may have brought a sense of relief, but SA cannot afford to push pause on efforts to address what may potentially have major implications for our local economy.
While the more than 30% duty allocated to all South African goods has been temporarily suspended, the 10% across-the-board base rate of the US’s global reciprocal tariffs announced on April 2 remains in place.
In addition, the 25% import tariff on vehicles and a targeted list of automotive components, announced earlier under the US Trade Expansion Act (referred to as “section 232 tariffs”) also remains in place, and has already come into effect.
It is still not clear whether automotive exports to the US will be subject to a “stacked” tariff, that is the reciprocal 10% plus the 25% auto-specific duty.
These actions effectively wipe out the duty-free access to the US market that South African goods, particularly from the agriculture and automotive sectors, have enjoyed under the Africa Growth and Opportunities Act (Agoa).
The preferential trade access under this Act comes to an end in September, unless the legislation is renewed — which increasingly looks unlikely in the current US policy environment.
The US is SA’s second biggest trading partner and our automotive industry’s second biggest export market, with vehicle exports to the US in 2024 valued at R24bn and components at R4.3bn.
More than 24,000 vehicles exported from SA to the US in 2024 represent 8% of our total vehicle exports — which may sound small, but this number represents thousands of jobs at local auto and components manufacturers, and in the supply chains of logistics and other services supporting this sector.
Losing this 8% will make many of the companies in the supply chain sub-critical.
The automotive industry is the largest manufacturing sector in the country and accounts for 60% of SA’s exported manufactured goods.
It is a privilege to have an industry like this in our country, especially considering the technology and skills which it brings and its knock-on job creation impact through the economic eco-system.
The Nelson Mandela Bay economy is highly reliant on automotive manufacturing, representing almost half the country’s direct employment in this sector.
It is vital to understand that the impact on the South African economy of these tariffs and the global trade wars they are sparking goes far beyond the bilateral trading relationship with the USA.
The entire global trade system has been upended and the competitiveness of local manufacturers, and the attractiveness of SA as an investment destination versus other manufacturing locations, is at stake.
In particular, SA’s Southern African Economic Partnership Agreement with the European Union and duty-free access to the US market under Agoa has boosted the case for investment in the local automotive manufacturing industry over the past two decades, and the loss of these benefits will have a negative impact on future investment decisions.
This, together with how the tariffs affect and are responded to by other countries, will affect global business strategies and decisions on optimal manufacturing locations.
A number of countries will now have significant cost advantages over SA, including countries on this continent, while other countries like Japan and Korea will simply absorb the tariffs through internal incentives.
This will put SA, which already has a logistics and distance disadvantage compared to other markets, in a very uncompetitive position.
Our local manufacturing economy, which has been relatively agile and resilient in responding to energy, logistics and enabling environment challenges in the country, is already struggling to be competitive versus other manufacturing operations around the world.
The SA automotive industry represents just 0.6% of global vehicle production, and its competitiveness relies heavily on the economies of scale derived from combined domestic demand and export orders.
A decline in export orders, if global automakers shift manufacturing from their SA plants to more favourable locations due to the impact of tariffs, would be a severe blow to those economies of scale, with knock-on impacts in terms of job losses and rising prices for consumers.
From a Bay perspective, our economy is anchored by vehicle manufacturing and includes a deep components manufacturing eco-system of first-, second- and third-tier suppliers.
Beyond this logistics, security, cleaning, catering, retailers and most types of businesses in the Bay indirectly benefit from the industry.
Thousands and thousands of local jobs have been created and are sustained through our automotive manufacturing industry.
The agriculture sector will be impacted too by the 10% base rate import tariff, particularly in citrus, where the Eastern Cape is the second largest citrus producing province, and the Sundays River Valley is the country’s largest single production area.
SA citrus plays an important role in supplying the US market during their off-season, and our duty-free access under Agoa has enabled SA citrus to compete with other southern hemisphere producers such as Peru and Chile.
As a result, SA’s citrus exports to the US have almost doubled since 2017.
The citrus industry is seasonal, and these changes are happening at the start of the new citrus season, creating uncertainty.
A speedy and proactive strategic response is required to enable local manufacturers and agricultural producers to find alternative solutions and implement mitigation actions.
Government needs to move with absolute urgency to restore a mutually beneficial trading relationship with the US, while assessing alternative markets and opportunities to reinvent and reposition our manufacturing and other affected sectors.
The situation has highlighted the pressing need for SA to diversify its trading relations, especially to leveraging relationships with Brics partners (where there are currently no free-trade agreements in place) and strengthening trade relations with the European Union and South East Asia markets.
Opportunities in the burgeoning economies of the Middle East must be explored, as well as under the African Continental Free Trade Agreement (AfCFTA).
If we are to create new markets for our locally built vehicles on the continent, it is vital that the rules of origin for vehicles are finalised as a matter of urgency, and that grey imports are prohibited.
Alongside trade policy, it is also crucial that government review industrial policy, particularly the SA Automotive Master Plan and automotive industry incentives to protect the competitiveness of local manufacturing — shielding against the impact of punitive tariffs and the flood of cheap imports and dumping of vehicles, as well as accelerating the localisation of component manufacturing.
As a small country and economy, heavily dependent on commodity exports, we must become more competitive to build resilience against these global shifts.
Competitiveness is not just a matter for industry to address. It needs to start with an enabling environment with regards to efficient logistics especially in terms of the ports and rail, stable and reliable energy supply and the delivery of basic municipal services.
Now is the time for all of us to take action to retain vital investment and employment in the Bay.
Denise van Huyssteen is chief executive of the Nelson Mandela Bay Business Chamber.
The Herald
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