Nelson Mandela Bay not immune from global trade wars
US President Donald Trump's 90-day pause on sweeping 'reciprocal' tariffs on imports from around the globe may have brought a sense of relief, but SA cannot afford to push pause on efforts to address what may potentially have major implications for our local economy.
While the more than 30% duty allocated to all South African goods has been temporarily suspended, the 10% across-the-board base rate of the US's global reciprocal tariffs announced on April 2 remains in place.
In addition, the 25% import tariff on vehicles and a targeted list of automotive components, announced earlier under the US Trade Expansion Act (referred to as 'section 232 tariffs') also remains in place, and has already come into effect.
It is still not clear whether automotive exports to the US will be subject to a 'stacked' tariff, that is the reciprocal 10% plus the 25% auto-specific duty.
These actions effectively wipe out the duty-free access to the US market that South African goods, particularly from the agriculture and automotive sectors, have enjoyed under the Africa Growth and Opportunities Act (Agoa).
The preferential trade access under this Act comes to an end in September, unless the legislation is renewed — which increasingly looks unlikely in the current US policy environment.
The US is SA's second biggest trading partner and our automotive industry's second biggest export market, with vehicle exports to the US in 2024 valued at R24bn and components at R4.3bn.
More than 24,000 vehicles exported from SA to the US in 2024 represent 8% of our total vehicle exports — which may sound small, but this number represents thousands of jobs at local auto and components manufacturers, and in the supply chains of logistics and other services supporting this sector.
Losing this 8% will make many of the companies in the supply chain sub-critical.
The automotive industry is the largest manufacturing sector in the country and accounts for 60% of SA's exported manufactured goods.
It is a privilege to have an industry like this in our country, especially considering the technology and skills which it brings and its knock-on job creation impact through the economic eco-system.
The Nelson Mandela Bay economy is highly reliant on automotive manufacturing, representing almost half the country's direct employment in this sector.
It is vital to understand that the impact on the South African economy of these tariffs and the global trade wars they are sparking goes far beyond the bilateral trading relationship with the USA.
The entire global trade system has been upended and the competitiveness of local manufacturers, and the attractiveness of SA as an investment destination versus other manufacturing locations, is at stake.
In particular, SA's Southern African Economic Partnership Agreement with the European Union and duty-free access to the US market under Agoa has boosted the case for investment in the local automotive manufacturing industry over the past two decades, and the loss of these benefits will have a negative impact on future investment decisions.
This, together with how the tariffs affect and are responded to by other countries, will affect global business strategies and decisions on optimal manufacturing locations.
A number of countries will now have significant cost advantages over SA, including countries on this continent, while other countries like Japan and Korea will simply absorb the tariffs through internal incentives.
This will put SA, which already has a logistics and distance disadvantage compared to other markets, in a very uncompetitive position.
Our local manufacturing economy, which has been relatively agile and resilient in responding to energy, logistics and enabling environment challenges in the country, is already struggling to be competitive versus other manufacturing operations around the world.
The SA automotive industry represents just 0.6% of global vehicle production, and its competitiveness relies heavily on the economies of scale derived from combined domestic demand and export orders.
A decline in export orders, if global automakers shift manufacturing from their SA plants to more favourable locations due to the impact of tariffs, would be a severe blow to those economies of scale, with knock-on impacts in terms of job losses and rising prices for consumers.
From a Bay perspective, our economy is anchored by vehicle manufacturing and includes a deep components manufacturing eco-system of first-, second- and third-tier suppliers.
Beyond this logistics, security, cleaning, catering, retailers and most types of businesses in the Bay indirectly benefit from the industry.
Thousands and thousands of local jobs have been created and are sustained through our automotive manufacturing industry.
The agriculture sector will be impacted too by the 10% base rate import tariff, particularly in citrus, where the Eastern Cape is the second largest citrus producing province, and the Sundays River Valley is the country's largest single production area.
SA citrus plays an important role in supplying the US market during their off-season, and our duty-free access under Agoa has enabled SA citrus to compete with other southern hemisphere producers such as Peru and Chile.
As a result, SA's citrus exports to the US have almost doubled since 2017.
The citrus industry is seasonal, and these changes are happening at the start of the new citrus season, creating uncertainty.
A speedy and proactive strategic response is required to enable local manufacturers and agricultural producers to find alternative solutions and implement mitigation actions.
Government needs to move with absolute urgency to restore a mutually beneficial trading relationship with the US, while assessing alternative markets and opportunities to reinvent and reposition our manufacturing and other affected sectors.
The situation has highlighted the pressing need for SA to diversify its trading relations, especially to leveraging relationships with Brics partners (where there are currently no free-trade agreements in place) and strengthening trade relations with the European Union and South East Asia markets.
Opportunities in the burgeoning economies of the Middle East must be explored, as well as under the African Continental Free Trade Agreement (AfCFTA).
If we are to create new markets for our locally built vehicles on the continent, it is vital that the rules of origin for vehicles are finalised as a matter of urgency, and that grey imports are prohibited.
Alongside trade policy, it is also crucial that government review industrial policy, particularly the SA Automotive Master Plan and automotive industry incentives to protect the competitiveness of local manufacturing — shielding against the impact of punitive tariffs and the flood of cheap imports and dumping of vehicles, as well as accelerating the localisation of component manufacturing.
As a small country and economy, heavily dependent on commodity exports, we must become more competitive to build resilience against these global shifts.
Competitiveness is not just a matter for industry to address. It needs to start with an enabling environment with regards to efficient logistics especially in terms of the ports and rail, stable and reliable energy supply and the delivery of basic municipal services.
Now is the time for all of us to take action to retain vital investment and employment in the Bay.
Denise van Huyssteen is chief executive of the Nelson Mandela Bay Business Chamber.
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Or, as The Hill newspaper reported, 'On May 21, a lackluster 20-year US Treasury bond auction delivered what can only be described as a resounding vote of no confidence in Washington's economic stewardship. The numbers were as stark as they were symbolic: a bid-to-cover ratio of 2.46 and a yield of 5.047 percent — the highest in five years.' Wrecking ball And then there is the damage created by Elon Musk's so-called Department of Government Efficiency, a wrecking ball decimating or destroying agencies like the Voice of America and the National Oceanic and Atmospheric Administration (aka the weather bureau, among its other functions), and essentially eliminating most of the country's foreign aid programmes. The secretary of state can insist, as he did just the other day in an act of abject obeisance to the Trump presidency, that this latter move has hurt no one. But others point to studies showing that many thousands are on the cusp of death or have already died because of the abrupt cancellation of grants in health and nutrition, especially the Pepfar programme in Africa. Nonetheless, Musk and his chainsaw are, at least for now, out of the formal picture with the end of his special government employee status, but who knows what will happen next month — or if he will return in some other act of legerdemain. Tackling several of the country's premier cultural institutions, meanwhile, the Trump administration has attempted to remove the leadership of some Smithsonian Institution museums and the heads of the Library of Congress and the Kennedy Center, all of them for being bastions of wokeness and DEI, whatever those might mean in Donald Trump's imagination. Simultaneously, the Trump administration, waving the bloody shirt of its putative fight against anti-Semitism on college campuses, is now effectively waging a punitive war on some of the country's premier universities — cancelling research grants, threatening their tax-exempt status that underpins the country's university financial systems, and it is ramping up criticism of academics who publicly hold views that the administration sees as the enemy at the gates. All of this can have much larger impacts. As The Economist put it: 'The attacks have been fast and furious. In a matter of months the Trump administration has cancelled thousands of research grants and withheld billions of dollars from scientists. Projects at Harvard and Columbia, among the world's best universities, have been abruptly cut off. A proposed budget measure would slash as much as 50% from America's main research-funding bodies. Because America's technological and scientific prowess is world-beating, the country has long been a magnet for talent. Now some of the world's brightest minds are anxiously looking for the exit. 'Why is the administration undermining its own scientific establishment? On May 19th Michael Kratsios, a scientific adviser to President Donald Trump, laid out the logic. Science needs shaking up, he said, because it has become inefficient and sclerotic, and its practitioners have been captured by groupthink, especially on diversity, equity and inclusion (DEI)… The assault on science is unfocused and disingenuous … [and] the administration is doing it grievous damage. The consequences will be bad for the world, but America will pay the biggest price of all.' Self-inflicted damage Most recently, as an example of serious self-inflicted damage, a new report on the nation's health issued by the Department of Health and Human Services under the bizarre leadership of Robert F Kennedy Jr, turns out to have at least partially been authored by AI apps, including imaginary scientific citations and authors. This is not something Trump critics have made up; rather, the report was the Trump team's own work product, further lessening the government's credibility with many. All this comes hand-in-hand with additional clampdowns on immigration (unless you are an Afrikaner farmer, apparently), and the refusal to adhere to court orders to return US citizens or permanent residents who had been summarily shipped off to prisons in El Salvador. And now, most recently, there has been the announcement that the State Department is going to examine the social media accounts of applicants for student or study visas, as well as — presumably — revoking the student visas of numbers of Chinese students who might have connections to that country's governing party or its defence establishment as potential security risks. (Does the administration not realise that applicants are routinely screened rather carefully by the State and Homeland Security departments before they are issued a student visa?) Taken as a whole, with Trump at the helm, the US government has increasingly become an angry, even deceitful enterprise, designed to reward its supporters, but punish everybody else, either by negative actions or a bestowal of benefits selectively on its friends. There is much more beyond what is listed above, and the temper of the Trump administration seems a reflection of its leader's own mean-spirited — never forget a slight or insult — personality. They see enemies everywhere within the nation; they pick fights with nations that have been staunch allies for decades; and they somehow find warmth in embracing autocrats and absolute monarchs. That is not the ethos of the nation I represented. Many of us are now hoping that the more than 100 court suits now contesting actions by the Trump administration will begin chipping away at this shambolic journey. In some places, demonstrations against the worst Trumpian excesses are beginning. Further, we can still hope the mid-term congressional election in 2026 will redress the party balance sufficiently to give a supine legislative branch the starch to oppose some of this madness. Living abroad as I do, many of the people I encounter are confused or astounded by what is happening in the US. Worse, some are convinced Trump's madness is the real America. Too many seem to believe all Americans espouse Donald Trump's views (whatever they really are at any given time), rather than the fundamentals of the country's national character, history and traditions that I had thought I understood rather well and had conveyed to my foreign friends and acquaintances. Still, despite this litany of ugliness, I remain cautiously optimistic that even in the midst of this national 'fugue state', the country can right itself and 'the angels of our better nature', to echo Abraham Lincoln, will reassert themselves — but they had better up their game before it is too late.
