The 30% tariff decision by the United States is not good news for the South African economy, and its potentially negative economic impact should not be underestimated.
Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says while not unexpected, the decision creates a challenging economic headwind for South Africa.
“For now, the most vulnerable sectors for South Africa, such as agriculture and cars, remain badly affected unless last-minute negotiations can still ameliorate the situation by 1 August. It is also clear that the latest United States tariff decision offsets any remaining advantages of duty-free access enjoyed so far by South Africa under the African Growth and Opportunity Act (AGOA), which in any event seems unlikely to be renewed by the United States Congress later this year.”
Prof Parsons says what further remains uncertain is the status of the threat by President Trump to impose an additional 10% tariff on BRICS members.
“The global reality is that the aggressive United States tariff policy is creating a fragmented world trading system that further elevates economic uncertainty, disrupts supply chains and hampers economic activity. While there is a great deal of fear psychology about just now, South Africa is not without remedies. As the country has a small open economy, it remains essential that bilateral negotiations must continue to stabilise and consolidate future United States-South Africa investment and trade relations.”
Prof Parsons explains that collaboration between the government and the private sector must continue to accelerate the steady identification of alternative markets, for which South Africa must remain globally competitive.
“The costs of doing business in South Africa are still too high. It therefore becomes even more essential to speedily implement growth-friendly policies that build economic buffers and reduce costs in ways that also enable South Africa to successfully deal with any global setbacks.”
He says the incipient economic recovery in South Africa is at present struggling to gain strong momentum. “The policy agenda of the Government of National Unity (GNU) for a 3% gross domestic product (GDP) growth target in the medium term therefore now urgently needs an impulse, a jolt, an acceleration to ensure that the tailwinds in the economy prevail over the headwinds in 2025 and beyond.”
