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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

UFS to investigate implementation of quality-monitoring system for SA food industry

2006-02-07

Some of the guests who attended the workshop were from the left Prof James du Preez (Chairperson: Department of Biotechnology at the UFS); Prof Lodewyk Kock (Head: South African Fryer Oil Initiative (SAFOI) at the UFS)); Mrs Ina Wilken (Chairperson: South African National Consumer Union (SANCU)); Prof Herman van Schalkwyk (Dean: Faculty of Natural and Agricultural Sciences at the UFS) and Mr Joe Hanekom (Managing Director of Agri Inspec).
Photo: Stephen Collet

UFS to investigate implementation of quality-monitoring system for SA food industry

The University of the Free State (UFS) will be investigating the implementation of a quality-monitoring service for the South African food industry.

This was decided during a workshop to discuss the external quality monitoring in the edible oil industry of South Africa, which was recently held at the UFS.

Major role players in the fast-food sector like Nando's, Spur, Captain
Dorego's, King Pie Holdings, Black Steer Holdings, etc and various oil
distributors like Felda Bridge Africa, Refill Oils, PSS Oils and Ilanga Oils attended
the workshop. Also present was Mrs Ina Wilken, Chairperson of the South African National Consumer Union (SANCU) and key-note speaker of this workshop. She represented the consumer.

These role players all pledged their support to the implementation of this quality- monitoring system for the whole food industry.

The decision to implement this system follows the various malpractices reported in the press and on TV concerning food adulteration (eg the recent Sudan Red Scare), misrepresentation (eg olive oil scandal exposed in 2001) and the misuse of edible frying oils by the fast-food sector.

“One of the basic rights of consumers is the right to safe food. Consumers must be protected against foods and food production processes which are hazardous to their health. Sufficient guarantee of the safety of all food products and food production processes should be implemented. It does not help to have adequate food standards and legislation and there is no manpower to do the necessary investigation or monitoring,” said Mrs Wilken.

The South African Fryer Oil Initiative (SAFOI), under the auspices of the UFS Department of Microbial, Biochemical and Food Biotechnology, currently monitors edible oils in the food industry and makes a seal of quality available to food distributors.

“Last week’s decision to implement the quality-monitoring system implies that we will now be involving also other departments in the UFS Faculty of Natural and Agricultural Sciences who are involved in various aspects of the food chain in an endeavor to implement this quality monitoring system,” said Prof Herman van Schalkwyk, Dean: Faculty of Natural and Agricultural Sciences at the UFS and one of the main speakers at the workshop.

Prof van Schalkwyk said that the main aim of such a system will be to improve the competitiveness of the South African food industry. “It is clear that the role players attending the workshop are serious about consumer service and that they agree that fraudulent practice should be monitored and corrected as far as possible. Although some of the food outlets have the capacity to monitor the quality of their food, it may not seem to the consumer that this is an objective process. The proposed external monitoring system would counteract this perception amongst consumers,” said Prof van Schalkwyk.

The workshop was also attended by representatives from SAFOI and Agri Inspec, a forensic investigation company collaborating with inter-state and government structures to combat fraud and international trade irregularities.

Agri Inspec has been working closely with SAFOI for a number of years to test the content of edible oils and fats. “Extensive monitoring and control actions have been executed in the edible oil industry during the past four years to ensure that the content and labeling of oil products are correct. Four years ago almost 90% of the samples taken indicated that the content differed from what is indicated on the label. This has changed and the test results currently show that 90% of the products tested are in order. However, to maintain this quality standard, it is necessary that quality monitoring and educational campaigns are continuously performed,” said Mr Joe Hanekom, Managing Director of Agri Inspec.

“The seal of quality presented by SAFOI should also be extended to include all the smaller oil containers used by households,” Mrs Wilken said.

The SAFOI seal of quality is currently displayed mainly on some oil brands packed in bigger 20 liter containers, which include sunflower oil, cottonseed oil, palm oil etc which are used by restaurants and fast food outlets. “Any oil type is eligible to display the seal when meeting certain standards of authenticity. In order to display the seal, the distributor must send a sample of each oil batch they receive from the manufacturer to SAFOI for testing for authenticity, ie that the container’s content matches the oil type described on the label. This is again double checked by Agri Inspec, which also draws samples countrywide from these certified brands from the end-user (restaurant or fast food outlets). If in breach, the seal must be removed from the faulty containers,” said Prof Lodewyk Kock, Head of SAFOI.

“It should however be taken into account that oils without a seal of quality from the UFS can still be of high quality and authentic. Other external laboratories equipped to perform effective authenticity tests may also be used in this respect,” said Prof Kock.

“It is also important to realise that any oil type of quality such as sunflower oil, cottonseed oil, palm oil etc can be used with great success in well controlled frying processes,” he said.

Further discussions will also be held with the Department of Health, the SA National Consumer Union and Agri Inspec to determine priority areas and to develop the most effective low-cost monitoring system.

More information on the UFS oil seal of quality and oil use can be obtained at www.uovs.ac.za/myoilguide

Media release
Issued by: Lacea Loader
Media Representative
Tel: (051) 401-2584
Cell: 083 645 2454
E-mail: loaderl.stg@mail.uovs.ac.za
6 February 2006

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