By Thebe Mabanga
Trade, Industry and Competition Minister Parks Tau and his International Relations counterpart Ronald Lamola will give an update on Monday, and hopefully a way forward, to the crisis caused by US President Donald Trump’s decision to impose a 30% tariff hike on South Africa’s exports to America as of Thursday.
The briefing comes at a time when there appears to be no solution in sight to the impasse as the US has not formally responded to South Africa’s proposed trade offer.
And, there is little to suggest that South Africa has explored policy alternatives in its tool kit which come at a cost of lost export or tax revenue, or both.
On Friday, President Cyril Ramaphosa stated that South Africa would use diplomatic channels and trade diversification as a response. But trade diversification is a long-term solution, and South Africa’s agriculture and automotive exporters need a solution they can apply in the fourth quarter of this year.
The tariffs were confirmed in an executive order signed last Thursday. For South Africa, the tariffs do not apply on items including copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, stainless steel scrap and energy and energy products.
“President Cyril Ramaphosa notes with concern the reciprocal tariffs imposed by the United States on South African products.” the Presidency said in a statement.
“The reciprocal tariffs have been imposed by the US on a significant number of its trade partners and South Africa has not been spared. South Africa will continue negotiating with the US regarding the 30% tariff announced by the US.
“Government has been engaging the United States and has submitted a Framework Deal that aims to enhance mutually beneficial trade and investment relations. All channels of communication remain open to engage with the US and our negotiators are ready pending invitation from the US.”
The Presidency also said the government was finalising a package to support companies that were vulnerable to the reciprocal tariffs.
“The package consists of a number of measures to assist companies, producers and workers affected by the tariffs on SA exports to the US. The details of the measures will be announced in due course.”
It is not clear if Tau and Lamola will offer any detail on these measures, or even what is being explored.
Last week, Tau announced that South Africa has offered to import $12 billion worth of Liquified Natural Gas from the US over the next 10 years, while requesting market access for poultry for about $91 million and renewed access for South Africa’s blueberries into the world’s largest economy.
South Africa has also proposed to invest in critical minerals, pharmaceuticals and agricultural machinery, and protect sectors such as ship building and exports from small and medium enterprises from the effects of these tariffs.
South Africa awaited feedback and a counteroffer to no avail. Tau has since indicated the proposals have been updated but offered no new details.
The DTIC has also established a support desk for affected companies.
It is meant to provide updates on developments and tailored advisory services to exporters on alternative destinations, guidance on market entry processes, insights into compliance requirements and linkages to South African embassies and high commissions abroad.
The department has underscored the likely impact of the tariffs.
“This tariff hike poses a direct threat to our export capacity, particularly in strategic sectors such as automotive, agro-processing, steel and chemicals amongst others.”
Until the US has formally rejected South Africa’s offer, and indicated which aspects it deems inadequate, it is difficult for South Africa, or any of the 185 countries in a similar position, to show their hand or announce their next move.
An earlier trade offer, tabled on May 20, was deemed “unambitious”.
Ramaphosa continues to maintain that South Africa’s trade partnership with the US is mutually beneficial and benign.
“South Africa and US trade relations are complementary in nature and South African exports do not pose a threat to US industry. Importantly, SA exports to the US contain inputs from the African continent and contribute to intra-Africa trade.”
Ramaphosa said all diplomatic efforts were being pursued and emphasised the need to keep companies and workers employed.
He also noted that government, business and export councils would help leading exporters to the US pursue alternative markets.
South Africa’s options include, in the extreme, using a targeted incentive measure to compensate the exporters who bear the brunt of the tariffs, especially the automotive exporters.
It can use export credit, rebates or tax breaks to compensate exporters, but those measures usually work for targeted exports, usually a specific line of goods, or if the tariffs are known to be in place for a limited period. These tariffs are too broad, and we do not know how long that will be in place.
The risk with these measures is that the US could simply raise tariffs further.
Also, they come at a heavy cost in lost export revenue or lost tax revenue. If SA had a commodity boom, such as that witnessed after Covid-19, it could investigate these measures, even temporarily. Tax revenues are currently strained to carry out such measures.
In the latest World Economic Outlook, the International Monetary Fund (IMF) has upwardly revised global growth as well the growth forecast for both the US and China, the world’s two largest economies.
The IMF now expects global growth to be 3% this year and 3.1% in 2026. This is up from previous projections published in April of 2.8% and 3%, respectively.
This is because a weaker dollar is now expected to counter the expected impact of the tariffs.
South Africa’s growth forecasts remain unchanged at 1% for this year and 1,3 % for 2026.
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