Does US President Donald Trump really want to impose 30% tariffs on South Africa?
Well, sort of.
On 1 August, he won’t be imposing his 30% tariffs on Platinum Group Metals (PGMs), gold, chrome and coal, which is about half of what we export to America.
Everything else will attract the 30%, except for cars which are 25% and steel and aluminium which he bumped up to 50%, because doubling the tariff halves the time it takes to build an aluminium smelter.
This mainly leaves agricultural products, which although important, is not devastating (except to the farmers).
Most of our agricultural exports, like citrus, are counter-seasonal, which means that when we are exporting naartjies to the US, they can’t supply because their naartjies are not ripe.
This was about the best example of trade with no trade-off imaginable. In this space, we are not competing with American farmers, we are up against Chile and Peru. If they end up with lower duties than us, this could really hurt.
But trade is fungible, so if Peru sells more oranges to America, their other markets will be deprived of citrus and we may be able to pick up some volume there. It might very well be worth meeting with countries in such positions to see if arrangements can be coordinated.
It is clear that the most agile countries will win here.
There is a very good chance that Trump is using this letter to apply maximum pressure on South Africa (and the other unfortunates like South Korea, Malaysia, Japan, and Kazakhstan) to move faster on their offers.
The question is what does Trump want?
We know it is not duty-free access to our market, because Vietnam offered exactly that and still got 20% tariffs.
Trump can move trade to a surplus by blocking the imports of PGMs and gold, but obviously he won’t do that.
Or does this have nothing at all to do with trade, much like his threats to Canada for sending fentanyl into America, a product exported in far greater volumes from the US to Canada. We should thank our lucky stars that Trump is not eyeing SA as his 52nd state.
In response to the Brics+ meeting, Trump has threatened to impose a 10% tariff on any country that says anything he finds disagreeable. This, Trump might find out, is everyone besides El Salvador and Russia.
And then we came out swinging for Russia.
I cannot anymore. Why is South Africa batting for Russia in the war in Ukraine? Russia invaded and we refused to condemn it. (Actually, Naledi Pandor did condemn it before being smacked down by President Ramaphosa.)
Ukraine takes out some Russian infrastructure and we complain about that. This is absolutely shameful.
I can, sort of, understand keeping quiet, but I cannot understand us supporting a colonising force doing everything they can to literally wipe another country off the map. On the upside, if such exists here, we may find ourselves aligned with Trump on this issue.
I’ve said before there is a high price for being a Brics partner and with no discernible benefit. Yes, diversifying trade away from America is essential, but no one ever bothers explaining how Brics+ provides anything resembling a viable alternative.
At XA Global Trade Advisors we are working frantically on analysing data to better measure the potential impact of Trump’s actions over the last three months.
We will hold a free Zoom briefing session on Friday, 11 July at 9am to talk about what is happening with the US and South Africa, so you can better plan your own business.
I will be joined by Ernst & Young partner Duane Newman and professors Clive Vinti and Lawrence Edwards (maybe), so at least some of the panel will know what they are talking about.
Click here to book your spot.
