Economists have warned that the tariff that US President Donald Trump imposed on South African could result in economic shocks, including a jobs bloodbath and soaring prices of goods in the long term.
The economists stated this after Trump this week shocked markets by unveiling protectionist policies, hitting some of the countries doing trade with the yanks.
This saw South Africa being slapped with a 31% tariff, a steep hike compared to the current 7.6% tariff.
Economist Azar Jammine indicated that the tariffs would impact negatively on the local automotive manufacturing sector.
“Around 6.5% of the automotive sector goes to the US and the value is R27-billion,” said Jammine, adding that the tariffs would affect brands like Mercedes-Benz and BMW.
“This might require them to reduce production and that might cause a reduction in the workforce,” he said.
Jammine said the job losses were likely to kick in after two months. “It’s not something that will happen in the next week. It will take quite a while because you’ve got stocks of goods that have already been exported.
“It’s not like SA companies are not going to export anything. It’s just that the demand for their goods might decline in the US due to the higher prices,” he said.
Another economist, Mandla Maleka, said government should respond to Trump’s tariffs by placing its ducks in a row.
“We are the biggest producers of macadamia nuts, and what does the 31% tariff increase mean on the macadamia nuts. Is anyone going to buy them? If people don’t buy them due to the higher price, what’s going to be the employment implication to South Africa, Unemployment Insurance Fund and revenue service. Whoever loses a job has a cascading effect on the economy and that effect affects SA Revenue Service and National Treasury’s revenue collection.
“It also affects the SA Reserve Bank’s decision because the more people are unemployed, they are not going to cut interest rates because people won’t have money to spend in the economy,” said Maleka.
Maleka added that the tariffs could lower demand for SA products like wine, citrus, and macadamia nuts, which could push the products back to the domestic market, flooding it and selling them at dirt-cheap prices.
“Those lower prices are going to be a short-term benefit to consumers but not a benefit to producers, who at a certain level of production, have absorbed costs they can’t recover. This will go to the extent of cutting jobs to maintain the domestic market or to find new international markets to replace what they were shipping to the US,” he said.
Maleka and Jammine warned that the US tariffs could result in international tariff wars between countries and lead to higher prices of goods.
Maleka, however, advised the government to deal with the matter diplomatically instead of imposing reciprocal tariffs or following Russia’s example, where it got rid of American companies and replaced them with local brands.
Trade and industry minister Parks Tau, during a media briefing on Friday, said it would be ill-considered to impose reciprocal tariffs. “Taking an approach that says we will impose reciprocal tariffs, firstly without understanding how the US arrived at 31% and then begin to respond without engaging with the US, would be counterproductive.
“It also runs the risk of the race to the bottom because everybody in the world is making different decisions, and there are all sorts of knee-jerk reactions to the announcements made. I think it’s a risky thing to start saying we are going to impose reciprocal tariffs.
He said the government was going to engage with the US and send an official delegation comprising a delegation of government and other stakeholders.
