US tariff increases prompt South Africa to look elsewhere

​​​​​​​By Murat Ozgur Guvendik and Emir Yildirim

Washington’s high 30% tariff on South Africa is expected to trigger significant losses in the short term for the country’s key export items, prompting it to seek new markets.

The tariff, effective Aug. 8, has contributed to the risks of investors pulling out, especially from the auto sector, while triggering declines in agricultural producer wages and employment.

South Africa’s unemployment rate hit 33% in the first quarter and the country estimates that the 30% tariff could result in 30,000 to 100,000 job losses in the short term.

Experts said there has yet to be an effective policy option to make up for the losses in the US market in the short term, while suggesting exports should be directed to new markets for the long term.

Martin Breitenbach, an associate professor of economics at the University of Pretoria, told Anadolu that the 30% tariff on South Africa will put heavy pressure on the economy, inflicting serious damage on its trade balance, growth rate and employment in the short and medium term.

Breitenbach said carmakers like Mercedes-Benz and Nissan are likely to pull out of the country with the developments. He said the US is South Africa’s second-largest trading partner, and the auto, mining, and agriculture sectors will be the most affected.

He highlighted that the country’s weakening foreign trade, lack of investment, negative growth, increasing unemployment and rising debt are some of the most prominent threats. He noted that structural changes and export diversification in the long term could only happen through establishing an investor-friendly economic environment.

Boitshoko Ntshabele, CEO of the South African Citrus Growers Association, told Anadolu that US tariffs would jeopardize citrus exporters’ competition, while agricultural producers in the country accelerated exports to the US ahead of the tariffs to make up for the losses this season.

Ntshabele said the country will suffer from the full effect of the tariffs next season, as well as layoffs, if a trade deal is not reached.

Wandile Sihlobo, chief economist at South Africa’s Agricultural Business Chamber (Agbiz), said the 30% tariffs pose serious uncertainty and risks for the agricultural sector.

He said the African and European markets make up two-thirds of South African agricultural exports, while the US market is indispensable, emphasizing that South Africa has the potential to increase exports to China, the Middle East and Asia.

Sihlibo stated that reaching swift and practical negotiations with China on tariff reductions is vital for a broader export growth strategy.

He added that harvest estimates for the 2024-25 season are high, expecting to see double-digit rises in corn, soybeans, sunflowers and other oilseeds.