The unexpected decision by President Donald Trump to suspend the reciprocal United States (US) tariffs on non-retaliatory countries for 90 days pending further negotiations has prompted a strong rebound in financial markets and a modification of previous gloomy economic forecasts.
Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says this decision now creates a welcome window of opportunity for many countries, including South Africa, to negotiate with the US for lower tariffs.
“South Africa, which has so far taken a careful and pragmatic stance on US tariffs, must now also seize the moment in a transactional manner to broker a better tariff deal in its trade flows with the US. For the automotive and agriculture sectors in particular there is much at stake should South Africa use the 90-day period to seek to ameliorate the negative impact of high US tariffs on their exports to that country.”
Prof Parsons says South Africa’s negotiation stance should be based on the likelihood that the African Growth and Opportunity Act (AGOA) will not be renewed. He explains that the probable pain of non-renewal or exclusion must be built into South Africa’s strategy.
“Countries like South Africa must therefore seek to get the best deal possible with the US. All the same, in assessing how valuable this additional breathing space will be for further negotiations, it would be prudent to avoid excessive expectations as to the eventual outcomes.”
According to Prof Parsons, there remains a high level of unpredictability in the US tariff situation and in the erratic way in which decisions continue to be made. It creates persistent uncertainty around business decision-making regarding investment and supply chains, which promotes a “wait-and-see” attitude.
“This is the overall policy environment within which affected nations will nonetheless need to negotiate with the US on tariffs and related matters. Bilateral negotiations may be distorted by the inclusion of non-tariff issues in the discussions and may also drive a wedge between countries, thus elevating economic uncertainty. Tariff uncertainty during the 90-day period can be as economically damaging as tariffs themselves.”
