US President Donald Trump’s overnight announcement of restrictive trade tariffs that place additional taxes on imports ranging from10% to as much as 34% for China, put the States at risk of a recession with a knock-on effect on economic growth in South Africa.
Image: White House/Facebook
US President Donald Trump’s overnight announcement of restrictive trade tariffs that place additional taxes on imports ranging from10% to as much as 34% for China, put the States at risk of a recession with a knock-on effect on economic growth in South Africa.
Every single import into the US will be hit with at least a 10% tariff, with those from the European Union attracting 20% and imports from China at 34% as Trump seeks to “Make America Great Again”.
Investec chief economist, Annabel Bishop, noted that the “escalation in the trade war” increased risk aversion in global financial markets, resulting in the rand spiking to R18.95. As of 12.30 on Thursday, the local currency was trading at R18.81 against the greenback.
A month ago, it was R18.60 and dropped as low as R18.08 on March 17.
Bishop stated that the reaction from financial markets was swift, with higher inflation expectations and fewer interest rate cuts for the US because of the marked increase of the cost of living because of the imposition of tariffs.
Old Mutual chief economist, Johann Els, said the tariffs were likely to “hasten the downturn in the US economy” and his probability of that country going into a recession given policy uncertainty combined with higher costs of imports is now 65%, up from, 40%. “My base case is that the US will experience a recession within the next 12 months,” he said.
Given that South Africa’s imports into the US will now attract a cumulative 30%, this puts downward potential on his gross domestic product growth (GDP) forecast for South Africa. Els’ current forecast for growth this year is 2.2%, although he may revise that downwards in the next few weeks.
Bishop said South Africa’s growth may come in at 1.3% this year.
The South African Reserve Bank anticipates growth of 1.9% this year compared with 0.6% in 2024, which is a sharp contrast to the aim that the government and business partnership have of 3% with a resultant gain of a million jobs.
Els did note that the US is not South Africa’s largest trading partner, attracting just more than 8% of all exports. “It is not a train smash,” he said, even though markets would react in terms of sentiment.
Dr Ernst van Biljon, a head lecturer and programme coordinator at the IMM Graduate School with a focus on supply chains, said that tariffs “throw a significant wrench into the gears of global supply chains and presents a particularly complex challenge for South Africa”. He stated that the sheer scale of the disparities signals a potential for major trade disruption.
“South Africa finds itself in a particularly precarious position. With a 30% tariff imposed on its goods entering the US, a figure significantly higher than that of many other trading partners, the country faces a substantial competitive disadvantage. This could severely impact key export sectors, such as agriculture, manufacturing and automotive, potentially leading to job losses and economic slowdown,” Van Biljon said.
Van Biljon added that this could lead to US importers shifting their sourcing away from South Africa towards countries with lower tariffs. “The increased trade barriers could deter foreign investment and hinder efforts to boost export-led growth,” he said.
Andrew Bahlmann, CEO of Deal Leaders International, said that countries that cut reciprocal tariffs could become seen as better investment destinations than South Africa, adversely affecting corporate action.
“On the other hand, South African companies, facing heightened competition in export markets, may become more vulnerable to acquisition by foreign entities seeking to capitalise on their weakened positions,” said Bahlmann.
“In response, South Africa needs to engage in direct diplomatic efforts to negotiate fairer trade terms with the US,” said Van Biljon.
The South African Presidency, in response to the tariffs, said, although the country remains committed to a mutually beneficial trade relationship with the United States, unilaterally imposed and punitive tariffs are a concern and serve as a barrier to trade and shared prosperity.
“The tariffs affirm the urgency to negotiate a new bilateral and mutually beneficial trade agreement with the US, as an essential step to secure long-term trade certainty,” it said.
IOL