Economists say SA must act smart to counter negative effect of Trump's tariffs

SA companies will have to come up with smart ideas and even consider other international markets to sell their goods to when the 30% tariff on exports to the US imposed by the Donald Trump administration kicks in from April 5.

This was the view of some economists after Trump’s announcement on Wednesday that the US will impose tariffs on more than 70 countries, actions which are seen as a big blow to international trade.

Economists agreed that though the e ffect of the hikes will not be felt immediately, they might have long-lasting, negative effects.   

An economist from KPMG SA, Frank Blackmore, said the 30% tariff will make local goods less competitive in the US market. 

“Essentially, it raises prices for American buyers ... and likely reduces their demand for our exports. Instead of exporting 100 units, we might now export only 80 or 90. That means South African companies must find alternative markets, which is the optimistic scenario. However, expanding into new markets takes time, money, and effort,” said Blackmore. 

He said local companies would need to do more to convince potential new markets to accommodate their products.

“Additionally, we may not have existing trade ties with some of these potential markets, making the process more complex. In the short term, production will likely decrease, leading to potential job losses. In extreme cases, some companies that rely heavily on US exports could shut down if they can’t remain profitable. The effect could be significant, and as for whether we’ll see immediate effects, it’s more of a ‘wait and see’ situation,” he said. 

According to the department of trade and industry, SA mostly exports fruits, nuts, wine, aluminium, platinum, gold and automotive supplies to the US.

Department spokesperson Toby Chance said: “The tariffs will disrupt global trade, not just [the US’s] trade with SA. One thing that SA should avoid is retaliating. We have a positive trade balance with the US – we export more than we import – so imposing counter-tariffs wouldn’t be beneficial. Trump’s policy aims to address certain trade imbalances, but in practice, it will primarily drive up costs and create uncertainty.”  

Chance said the direct effect of the tariffs for local consumers may not be immediate, but businesses will have to adjust. 

“US customers will have to reconsider where they source their products from. Each [SA] company will have to navigate these challenges with their customers, either by reducing production or seeking alternative markets.”

He said the tariffs could lead to an influx of cheap imports into SA.

“Since these tariffs affect multiple countries, many of them will be looking for new markets. This could lead to an influx of low-priced imports as businesses try to redirect their products. As a result, our borders, the SA Revenue Service, and trade monitoring agencies must be vigilant to prevent a surge of cheap imports that violate anti-dumping regulations,” Chance said. 

The US accounts for 4% of SA’s agricultural exports, totalling $13.7bn in 2024.

Chief economist at Agri Businesses, Wandile Sihlobo, said SA should seek a free-trade agreement with the US when the dust settles. 

“A reliable, long-standing trade arrangement would serve South African industries well. We also believe the retaliation approach [imposing counter tariffs] may not be ideal. The best approach would still be to seek better relations with the US. For businesses, the uncertainty will linger until there is clarity about product-specific tariffs, which will help plan the new environment,” Sihlobo said.

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