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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 awards honorary doctorates during its centenary week

2004-10-07

The University of the Free State (UFS) will award 12 honorary doctorates on Thursday 14 October 2004 to a diverse group of outstanding South Africans and international experts.

This will be the last in a group of 18 honorary doctorates that the UFS will be awarding in its centenary year.

The awards comprise of a number of well-known language experts and writers, experts in higher education, first-time awards in community service and development studies, as well as music.

“This reflects quality and also diversity, a spectrum of convictions as well as the recognition of persons who played a major role in changing society in the last couple of decades, “ says Prof Frederick Fourie, Rector and Vice-Chancellor of the UFS.

The awards can be grouped in the following categories:

Language and literature:

Mr Karel Schoeman (D Litt (hc)) – well-known Afrikaans author and former student of the UFS. Some of the awards he has received include the Hertzog prize for prose (1970, 1986 and 1995), the CNA prize (1972 and 1994), the Old Mutual prize (1985 and 1991), the SABC prize for best television drama in 1990, the M Net book prize in 1997 and the State President award (former President Nelson Mandela: Order for Excellent Service – silver) in 1999. It is an honor for the UFS to have this gifted and creative person among its former students. This conferment is a fitting recognition of his status as leading South African writer.

Ms Antjie Krog (D Litt (hc)) – well-known South African poet and former student of the UFS. Her popularity as poet is evident in her piercing honesty and unequalled power of expression. Some of the awards she has received include the Eugéne Marais prize in 1973, the Rapport prize in 1987, the Hertzog prize in 1990 and the RAU prize in 2000. Her writing has been translated into seven languages. She has also received numerous honors for her involvement in and journalistic documentation of the Truth and Reconciliation Commission’s (TRC) proceedings. It is therefore an exceptional privilege for her alma mater to honor her with an honorary doctorate.

Prof Jaap Steyn (D Litt (et phil) (hc)) – recently, Prof Steyn again distinguished himself as biographer whose thorough research is apparent in the published biographies of illustrious writers such as NP van Wyk Louw and MER. The numerous awards, among which the Stals prize from the South African Academy of Science and Art for the Van Wyk publication, are a matter of record. He conducted the research for this great prize-winning work as honorary professor at the UFS.

Prof Jakes Gerwel (D Phil (hc)) – Chancellor of the University of Rhodes and Director of Naspers, Old Mutual, Gold Fields and Brimstone. His doctoral thesis was published in The Netherlands under the title Literatuur en apartheid. Konsepsies van “gekleurdes” in die Afrikaanse roman tot 1948 (1983). He received an honorary doctorate from Clark College ( Atlanta), the City University of New York and Missouri in the USA, the University of the Western Cape, the University of Cape Town, the University of Natal, Rhodes University, the University of Stellenbosch and the University of the Witwatersrand. He is also outstanding professor in the Humanities at the University of the Western Cape, honorary professor in the Humanities at the University of Pretoria, and was the chairman of the Human Sciences Research Council (HSRC).

Development Studies:

Dr Frederick van Zyl Slabbert (D Phil (hc)) – for his academic achievements, his endeavors for bringing about a peaceful transition in South Africa and his demonstration of the social investment role of the corporate sector. Dr Van Zyl Slabbert has received honorary degrees from the University of Natal and the Simon Fraser University in Canada. He has published seven books and various academic articles.

Community Service:

Prof Robert G Bringle (D Phil (hc)) – from the Indiana University-Purdue University Indianapolis (IUPUI) in the USA. He is currently Chancellor’s Professor of Psychology and Philanthropic Studies at the IUPUI and also Director of the IUPUI’s Centre for Service Learning. He is honored for his exceptional contribution to several of the UFS’s community service projects as well as his role in the advancement of a multi- and inter-disciplinary approach to academic development and the integration of service learning within the faculties of the UFS. He has also made a valuable contribution to the conceptual framework of the UFS’s unique community service policy and more recently to the advancement of a research culture regarding community service.

Higher education:

Dr Khotso Mokhele (D Phil (hc)), President of the National Research Foundation (NRF) is honored for his contribution to the South African higher education sector. He has also made a substantial contribution to the development of the research capacity of universities and technikons in South Africa. Dr Mokhele was born in Bloemfontein and matriculated at the Moroka High School in Thaba Nchu.

Prof Saleem Badat (D Phil (hc)), the Chief Executive Officer of the Council on Higher Education (CHE). Prof Badat has devoted himself to transforming and building South African higher education, and has constantly challenged the higher education sector to retain the moral basis of higher education and tackle its challenges with intellectual honesty, ingenuity, creativity and courage. He is honored for his intellectual leadership in the development of a equitable, just and quality higher education system in South Africa.

Law:

Prof HA (Boelie) Wessels (D Legum (hc)) – for his contribution to the fields of Roman Law, Legal History at the UFS. He is currently a part-time lecturer at the UFS’s Faculty of Law.

Medicine:

Prof CJC Nel (D Phil (hc) Posthumous) – for the way in which he strived for the advancement of excellent medical education in the country. Prof Nel also did pioneering work in the field of transformation in higher education. Under his guidance the School of Medicine at the UFS became one of the first medical schools to adopt a parallel-medium system of instruction.

Music:

Prof Leo Quayle (D Mus (hc)) – for the significant contributions he has made to the development of music – not only in Bloemfontein, but also on national level and abroad. His initiative, enthusiasm and dedication contributed to the eventual founding of the Free State Musicon, as well as the first symphony orchestra and the first string quartet in Bloemfontein. Prof Quayle is a former head of the Department of Music at the UFS.

Prof Jack de Wet (D Mus (hc)) – well-known for his exceptional contribution to violin tuition in South Africa. As pedagogue of international stature, he still moulds violinists who compete at national and international level. At an advanced stage of his career, he still actively conveys his knowledge, experience and distinctive insight in his field of speciality to yet another new generation of young violin teachers. Today the symphony orchestras in Bloemfontein and Port Elizabeth also stand on the foundations laid by him.

Media release
Issued by: Lacea Loader
Media Representative
Tel: (051) 401-2584
Cell: 083 645 2454
E-mail: loaderl.stg@mail.uovs.ac.za
7 October 2004

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