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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

Inaugural lecture: Prof Robert Bragg, Dept. of Microbial, Biochemical and Food Biotechnology

2006-05-17

Attending the inaugural lecture were in front from the left Prof Robert Bragg (lecturer at the Department of Microbial, Biochemical and Food Biotechnology) and Frederick Fourie (Rector and Vice-Chancellor). At the back from the left were Prof James du Preez (Departmental Chairperson: Department of Microbial, Biochemical and Food Biotechnology) and Prof Herman van Schalkwyk (Dean: Faculty of Natural and Agricultural Sciences). Photo: Stephen Collett

A summary of an inaugural lecture delivered by Prof Robert Bragg at the University of the Free State:

CONTROL OF INFECTIOUS AVIAN DISEASES – LESSONS FOR MAN?

Prof Robert R Bragg
Department of Microbial, Biochemical and Food Biotechnology
University of the Free State

“Many of the lessons learnt in disease control in poultry will have application on human medicine,” said Prof Robert Bragg, lecturer at the University of the Free State’s (UFS) Department of Microbial, Biochemical and Food Biotechnology during his inaugural lecture.

Prof Bragg said the development of vaccines remains the main stay of disease control in humans as well as in avian species. Disease control can not rely on vaccination alone and other disease-control options must be examined.

“With the increasing problems of antibiotic resistance, the use of disinfection and bio security are becoming more important,” he said.

“Avian influenza (AI) is an example of a disease which can spread from birds to humans. Hopefully this virus will not develop human to human transmission,” said Prof Bragg.

According to Prof Bragg, South Africa is not on the migration route of water birds, which are the main transmitters of AI. “This makes South Africa one of the countries less likely to get the disease,” he said.

If the AI virus does develop human to human transmission, it could make the 1918 flu pandemic pale into insignificance. During the 1918 flu pandemic, the virus had a mortality rate of only 3%, yet more than 50 million people died.

Although the AI virus has not developed human-to-human transmission, all human cases have been related to direct contact with infected birds. The mortality rate in humans who have contracted this virus is 67%.

“Apart from the obvious fears for the human population, this virus is a very serious poultry pathogen and can cause 100% mortality in poultry populations. Poultry meat and egg production is the staple protein source in most countries around the world. The virus is currently devastating the poultry industry world-wide,” said Prof Bragg.

Prof Bragg’s research activities on avian diseases started off with the investigation of diseases in poultry. “The average life cycle of a broiler chicken is 42 days. After this short time, they are slaughtered. As a result of the short generation time in poultry, one can observe changes in microbial populations as a result of the use of vaccines, antibiotics and disinfectants,” said Prof Bragg.

“Much of my research effort has been directed towards the control of infectious coryza in layers, which is caused by the bacterium Avibacterium paragallinarum. This disease is a type of sinusitis in the layer chickens and can cause a drop in egg product of up to 40%,” said Prof Bragg.

The vaccines used around the world in an attempt to control this disease are all inactivated vaccines. One of the most important points is the selection of the correct strains of the bacterium to use in the vaccine.

Prof Bragg established that in South Africa, there are four different serovars of the bacterium and one of these, the serovar C-3 strain, was believed to be unique to Southern Africa. He also recently discovered this serovar for the first time in Israel, thus indicating that this serovar might have a wider distribution than originally believed.

Vaccines used in this country did not contain this serovar. Prof Bragg established that the long term use of vaccines not containing the local South African strain resulted in a shift in the population distribution of the pathogen.

Prof Bragg’s research activities also include disease control in parrots and pigeons. “One of the main research projects in my group is on the disease in parrots caused by the circovirus Beak and Feather Disease virus. This virus causes serious problems in the parrot breeding industry in this country. This virus is also threatening the highly endangered and endemic Cape Parrot,” said Prof Bragg.

Prof Bragg’s research group is currently working on the development of a DNA vaccine which will assist in the control of the disease, not only in the parrot breeding industry, but also to help the highly endangered Cape Parrot in its battle for survival.

“Not all of our research efforts are directed towards infectious coryza or the Beak and Feather Disease virus. One of my Masters students is currently investigating the cell receptors involved in the binding of Newcastle Disease virus to cancerous cells and normal cells of humans. This work will also eventually lead to a possible treatment of cancer in humans and will assist with the development of a recombinant vaccine for Newcastle disease virus,” said Prof Bragg.

We are also currently investigating an “unknown” virus which causes disease problems in poultry in the Western Cape,” said Prof Bragg.

“Although disinfection has been extensively used in the poultry industry, it has only been done at the pre-placement stage. In other words, disinfectants are used before the birds are placed into the house. Once the birds are placed, all use of disinfectants stops,” said Prof Bragg.

“Disinfection and bio security can be seen as the ‘Cinderella’ of disease control in poultry. This is also true for human medicine. One just has to look at the high numbers of people who die from hospital-acquired infections to realise that disinfection is not a concept which is really clear in human health care,” said Prof Bragg.

Much research has been done in the control of diseases through vaccination and through the use of antibiotics. “These pillars of disease control are, however, starting to crumble and more effort is needed on disinfection and bio security,” said Prof Bragg.

Prof Bragg has been working in close co-operation with a chemical manufacturing company in Stellenbosch to develop a unique disinfectant which his highly effective yet not toxic to the birds.

As a result of this unique product, he has developed the continual disinfection program for use in poultry. In this program the disinfectant is used throughout the production cycle of the birds. It is also used to ensure that there is excellent pre-placement disinfection.

“The program is extensively used for the control of infectious diseases in the parrot-breeding industry in South Africa and the product has been registered in 15 countries around the world with registration in the USA in the final process,” said Prof Bragg.

“Although the problem of plasmid mediated resistance to disinfectants is starting to rear its ugly head, this has allowed for the opening of a new research field which my group will hopefully exploit in the near future,” he said.

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