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The 30% tariff hike: SA must strengthen diplomatic ties, diversify trade partnerships beyond the US

07 April 2025 Photo Supplied

Opinion article by Dr Calvin Mudzingiri, Assistant Dean: Economic and Management Sciences, University of the Free State, Qwaqwa Campus

The sudden hike of import tariffs by US President Donald Trump and his administration to countries across the world is set to reduce the volume of goods traded and affect citizen welfare across the globe. The Trump administration implemented a global 10% import tariff and a varying targeted reciprocal tariff to a host of countries, including South Africa. The reciprocal import tariff to be levied on South African export goods to the US is set at 30%. Historical data show that yearly trade between SA and US amounts to $23 billion and the US is SA’s the second biggest trading partner after China. The high tariff will reduce the competitiveness of South African export goods to American markets, leading to reduced demand of SA exports in US markets, low income to firms, job losses, low income to households and ultimately lower South African economic growth.

SA and US trade

South Africa exports platinum, locally assembled cars, raw aluminium, ferroalloys and agriculture products, among other goods, to the US. The implication of the US administration’s 30% tariff hike could result in job losses in the mining, automobile, agriculture and many other industries. More income losses to SA agricultural exports can also be experienced if the African Growth Opportunity Act (AGOA) expires in September 2025, if the US congressmen decide not to renew the agreement. Given the low economic growth rate in South Africa in 2024, which is estimated at 0.6%, the tariff hike by the US will exacerbate sluggish economic growth and recovery from the COVID 19 pandemic.

Statistics also show that SA imports energy products, machinery, vehicle, industrial and other consumer goods. The goods and services SA imports from the US play a critical role in developing and sustaining local industry. SA can decide to source the goods from other markets and if this happens with all economies where tariffs were imposed, the US will be worse off. There is a possibility that economies which received a tariff hike from the US will implement a reciprocal tariff hike to the US reducing the volume of global trade. The reduced trade volumes have dire implications for job creation, income generation by firms and households, making citizens worse off.

US current trade policy

It is important to note that President Trump administration’s trade policies are premised on a trade notion synonymous to ‘mercantilism’, which was practised in Europe between the 16th to 18th centuries. Under mercantilism, an economy aims to maintain a trade surplus, the government regulate the economy, discourage imports (in the case of the US using tariff hikes) and promote growth of home industries among other initiatives. Conventional economics wisdom has proved that policies pursued by the Trump administration of protectionism are a breeding ground for trade wars. There is great potential of fellow trading partners retaliating and if that happens, global citizens will be made worse off as they will be forced to pay high prices for goods due to additional costs driven by tariff hikes. In addition, US industry relies on raw materials from other countries. If the suppliers of raw material resources retaliate, the production cost model of US firms will rise, reducing export competitiveness of US exports.

Trump’s administration is calling for firms across the world to move and produce goods in the US to avoid tariff levies. The action works against the benefits of free trade and can affect firms’ comparative advantages. The production cost structure in the US can be higher than in other countries leading to firms realising low profits if they move to the US. It is essential to note that free trade with absolutely no trade barriers will enhance the welfare of citizens at large, since goods and services will be purchased at low prices. The US government’s act of over-regulating trade can limit economic growth not only of other countries but even that of the US economy.

Options for the SA government

In the face of trade adversity, the SA government must not fold its hands and do nothing. It is enlightening to note that the authorities have already initiated diplomatic and trade negotiations. Negotiations can possibly focus on tariff reduction, maintaining the AGOA, and delving deep in the logic used to arrive at the 30% tariff hike. The diplomatic initiatives must encompass improving perceptions and clarity of SA policies such as the Expropriation Act which is one of the reasons cited by the US administration in ratcheting the tariff trade war.

South Africa must re-orient its trading patterns and partnerships. The aggregate world gross domestic product (GDP) is greater than the US total production for goods and services. There is need for SA to improve trade relations with other economies to broaden its trade base. The current frosty trade relationship between SA and the US presents a window to strengthen trade with the EU, Asia, BRICS plus, Africa, and any other economy willing to get into trade partnerships. SA must explore other markets where the export goods still enjoy competitiveness.

To ensure economic resilience to trade wars in the long run, SA needs to seriously invest in research and development that promote value addition of local production, enhancing local production and technology advancement that can stimulate economies of scale, which can boost competitiveness of export goods. Competitiveness can be further enhanced by improving energy production efficiency, which is a crucial input of goods and services production. Developing a powerful and skilled human capital base can lead to labour productivity efficiency, further enhancing competitiveness. SA has a dilapidated infrastructure ranging from roads, rail, buildings and industry among others. Improving the infrastructure will go a long way in improving local production, leading to creation of jobs and improved incomes for households.

Boosting local economic activity can stimulate local consumption of goods as household income improves. If the incomes of SA citizens improve, there is a potential to increase local consumption. Goods meant for export markets can end up being consumed in the domestic markets, providing a homemade solution to dwindling export goods markets. The SA government must consider developing and supporting new industries that can compete in the local and international markets. In this way, the trade challenges posed by unfriendly US administration trade policies can present opportunities to the SA economy in the long run.

News Archive

SA universities are becoming the battlegrounds for political gain

2010-11-02

Prof. Kalie Strydom.

No worthwhile contribution can be made to higher education excellence if you do not understand and acknowledge the devastating, but unfortunately unavoidable role of party politics in the system and universities of higher education and training (HET).

This statement was made by Prof. Kalie Strydom during his valedictory lecture made on the Main Campus of the University of the Free State (UFS) in Bloemfontein recently.

Prof. Strydom, who was awarded an Honorary Doctorate by the UFS in 2010, presented a lecture on the theme: The Long Walk to Higher Education and Training Excellence: The Struggle of Comrades and Racists. He provided perspectives on politics in higher education and training (HET) and shared different examples explaining the meaning of excellence in HET in relation to politics.

“At the HET systems level I was fortunate to participate in the deliberations in the early nineties to prepare policy perspectives that could be used by the ANC in HET policy making after the 1994 elections. At these deliberations one of the important issues discussed was the typical educational and training pyramid recognised in many countries, to establish and maintain successful education and training. The educational pyramid in successful countries was compared to the SA “inverted” pyramid that had already originated during apartheid for all races, but unfortunately exploded during the 16 years of democracy to a dangerous situation of 3 million out-of school and post-school youth with very few education and training opportunities,” he said.

In his lecture, Prof. Strydom answered questions like: Why could we as higher educationists not persuade the new democratically elected government to create a successful education and training pyramid with a strong intermediate college sector in the nineties? What was the politics like in the early and late nineties about disallowing the acceptance of the successful pyramid of education and training? Why do we only now in the latest DHET strategic planning 2010–2015 have this successful pyramid as a basis for policymaking and planning?

At an institutional level he explained the role of politics by referring to the Reitz incident at the UFS and the infamous Soudien report on racism in higher education in South Africa highlighting explosive racial situations in our universities and the country. “To understand this situation we need to acknowledge that we are battling with complex biases influencing the racial situation,” he said.

“White and black, staff and students at our universities are constantly battling with the legacy of the past which is being used, abused and conveniently forgotten, as well as critical events that white and black experience every day of their lives, feeding polarisation of extreme views while eroding common ground. Examples vary from the indoctrination and prejudice that is continued within most homes, churches and schools; mass media full of murder, rape, corruption; political parties skewing difficult issues for indiscrete political gain; to frustrating non-delivery in almost all spheres of life which frustrates and irritates everyone, all feeding racial stereo typing and prejudice,” said Prof. Strydom.

A South African philosopher, Prof. Willie Esterhuyse, recently used the metaphor of an “Elephant in our lounge” to describe the syndrome of racism that is part of the lives of white and black South Africans in very different ways. He indicated that all of us are aware of the elephant, but we choose not to talk about it, an attitude described by Ruth Frankenberg as ‘colour evasiveness’, which denies the nature and scope of the problem.

Constructs related to race are so contentious that most stakeholders and role-players are unwilling to confront the meanings that they assign to very prominent dimensions of their experience; neither does management at the institutions have enough staff (higher educationists?) with the competencies to interrogate these meanings, or generate shared meanings amongst staff and students (common ground). A good example that could be compared with “the elephant in our lounge” remark is the recent paper of Prof. Jonathan Jansen, Rector and Vice-Chancellor of the UFS on race categorisation in education and training.

According to Prof. Strydom, universities in South Africa are increasingly becoming the battlegrounds for political gain which creates a polarised atmosphere on campuses and crowds out the moderate middle ground, thereby subverting the role and function of the university as an institution within a specific context, interpreted globally and locally.

Striving for excellence, mostly free from the negative influences of politics, in HET, from the point of view of the higher educationist, is that we should, through comparative literature review and research, re-conceptualise the university as an institution in a specific context. This entails carefully considering environment and the positioning of the university leading to a specific institutional culture and recognising the fact that institutional cultures are complicated by many subcultures in academe (faculties) and student life (residences/new generations of commuter students).

Another way forward in striving for excellence, mostly free from politics, is to ensure that we understand the complexities of governing a university better. D.W. Leslie (2003) mentions formidable tasks related to governance influenced by politics:

Balancing legitimacy and effectiveness.
Leading along two dimensions: getting work done and engaging people.
Differentiating between formal university structures and the functions of universities as they adapt and evolve.
Bridging the divergence between cultural and operational imperatives of the bureaucratic and professional sides of the university.

Prof. Strydom concluded by stating that it is possible to continue with an almost never ending list of important themes in HE studies adding perspectives on why it is so easy to misuse universities for politics instead of recognising our responsibility to carefully consider contributions to transformation in such an immensely complicated institution as the university within a higher education and training system.

Download Valedictory lecture of Prof. Kalie Strydom (Pdf)

Media Release
Issued by: Lacea Loader
Director: Strategic Communication (acting)
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: loaderl@ufs.ac.za
29 October 2010

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