Alarm bells ring for one of South Africa’s most important industries

South Africa’s trade ministry will seek talks with the US as its auto industry braces for a hit from Washington’s new tariffs this week, saying the duties could hurt local manufacturers and the economy. 

Washington will impose a 25% levy on imports of automobiles and some parts to address what it perceived to be a threat to its national security starting April 3. 

South African vehicles currently enjoy duty-free access to the world’s biggest economy because of a preferential trade pact, but the new taxes will override that, which could have a “potentially negative effect on the South African economy,” the Department of Trade, Industry and Competition said in a statement Tuesday.  

US President Donald Trump’s latest wave of duties expand his trade war and come as relations between Pretoria and Washington have soured, stoking fear over the fate of trade arrangements such as the African Growth and Opportunity Act, through which thousands of South African goods enter the US duty-free.

Auto exports from Africa’s most industrialized economy accounted for 64% of the nation’s shipments to the US under AGOA, with the DTIC estimating shipments of cars and parts at $2.4 billion last year.

The nation’s car industry accounts for more than 5% of gross domestic product and employs more than 116,000 people.  

Conversely, South Africa’s exports of automobiles account for only 0.99% of total US vehicle imports and 0.27% for auto parts and “thus do not constitute a threat to US industry,” the department said. 

The DTIC’s statement sheds light on whether the new US duties would apply to South African shipments under AGOA.

The department said it expects they will because similar determinations on steel and aluminium nullified preferences bestowed by the act.

Washington is using section 232 of the Trade Expansion Act of 1962 to institute taxes on national security grounds. 

ABC Chief Economist Paulina Mamogobo said South Africa’s Automotive Business Council — also known as Naamsa and whose members include Volkswagen and Toyota — is in talks with the DTIC and the Department of International Relations and Cooperation to lobby for exemption from Washington’s executive action. 

South Africa is preparing to pitch a bilateral trade agreement to the US in case the nation’s preferential access to the country is revoked. President Cyril Ramaphosa’s government considers a bilateral accord better than preferential treatment because it would be a negotiated deal, and it would prefer to transition away from AGOA.

Pretoria wants to reset US relations that have deteriorated since Trump’s return to the White House. He has frozen aid to the country amid false claims of land seizure at the expense of White farmers.

South Africa hasn’t confiscated any land since the end of apartheid in 1994.

Washington has also taken Pretoria to task over its relations with Iran and its proxy Hamas and for filing a case in the International Court of Justice in which it alleges that Israel’s actions in the Gaza Strip were an act of genocide.