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07 April 2025 Photo Supplied
Dr Calvin Mudzingiri
Dr Calvin Mudzingiri, Assistant Dean: Faculty of Economic and Management Sciences, University of the Free State, Qwaqwa Campus.

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

State of our campuses: UFS Qwaqwa Campus temporarily closed until 18 April 2017
2017-04-03

The senior leadership of the University of the Free State (UFS) has decided to close the Qwaqwa Campus on Tuesday 28 March 2017 due to student protests regarding provisional registrations. Academic activities will resume on 18 April 2017. 
 
The protests were preceded by a meeting of the campus management with the Student Representative Council (SRC) on 22 March 2017 to discuss issues pertaining to students who are provisionally registered – especially those students who are provisionally registered and awaiting the outcome of their appeals to the National Student Financial Aid Scheme (NSFAS).
 
On 27 March 2017, the SRC handed a memorandum to the campus management, requesting assistance in cases that are on appeal with NSFAS. The students also demanded extension of the provisional registration deadline of 31 March 2017, and that a fundraising plan should be implemented for financially needy students. The campus management made a commitment to respond within the deadline stipulated in the memorandum.
 
After the meeting, violence erupted when a group of students started intimidating students, barricading the entrance to the campus, and damaging university property. An interdict was served by the Sheriff later the same afternoon and additional security was deployed. On 28 March 2017, the violent protests and barricades spilled onto the provincial road to Phuthaditjhaba and several cars were damaged. This led to the arrest of a number of students by members of the South African Police Service for the contravention of the High Court order and for public violence. The students have since been released.
 
Due to the imminent threat to the safety of staff and students on the campus, the senior leadership decided on 28 March 2017 to evacuate the residences and to close the campus temporarily until 18 April 2017.
             
“It is unfortunate that the students resorted to violence without waiting for the campus management’s response to the memorandum of 27 March 2017. What makes the situation difficult is the fact that students on provisional registration who are waiting for the outcome of their NSFAS appeals, are dealing directly with NSFAS. This makes it difficult for the university to intervene,” says Mr Teboho Manchu, acting Principal of the Qwaqwa Campus.
 
The senior leadership of the UFS is aware of the video clip on social media this week, where a student is allegedly beaten by security guards on the Qwaqwa Campus. The senior leadership condemns this deplorable incident. An investigation is underway to determine the nature and cause of the incident. Appropriate steps will be taken once the outcome of the investigation is available.

Released by:
Lacea Loader (Director: Communication and Brand Management)
Telephone: +27 51 401 2584 | +27 83 645 2454
Email: news@ufs.ac.za | loaderl@ufs.ac.za
Fax: +27 51 444 6393


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