As an emerging economy, South Africa is particularly vulnerable to trade wars amid the global rise of nationalism, but there is hope that sanity will prevail.
This is according to Dawie Roodt, chief economist at Efficient Group. Addressing delegates at the Sandton Tourism and Business Association’s annual general meeting on Friday, he pointed out that the United States trade war with China, as well as Britain’s impending exit from the European Union (Brexit), were two prime examples of the global political landscape changing from a “global village” to one espousing “national protectionism”.
He said this change was negatively affecting ease of trade between countries.
“Open trade means lower transaction costs and easier physical access to markets as more trading routes are created. Protected trade means a tightening of border controls and higher transaction costs, which has a direct negative impact on emerging markets,” explained Roodt.
He said it was not just the US and Britain which were focused on nationalised policies, but also countries such as Brazil, Spain and Hungary.
“However, these kinds of policies have historically been proven to backfire and the day of reckoning is coming,” said Roodt, noting that the US economy, while flourishing now, was heading for a recession.
“That’s why there is hope that sanity will prevail and that these countries will heed the warning of, amongst others, the World Trade Organisation,” he said.
