Clock is ticking for South Africa

South Africa should seize the moment granted by United States President Donald Trump’s 90-day pause on reciprocal tariffs to broker a better tariff deal with the US.

NWU Business School economist Professor Raymond Parsons warned that failure to do so could carry significant risk for South Africa’s automotive and agricultural sectors.

His comments follow Trump’s announcement of a 90-day pause on higher reciprocal tariffs, which hit dozens of the United States’ trade partners while raising duties on China to 125%.

This turn comes roughly 13 hours after higher reciprocal duties on 56 nations and the European Union took effect, fueling market turmoil and stoking recession fears. 

This led to significant pressure on Trump, as business leaders and investors urged him to reconsider his hefty tariffs.

“I thought that people were jumping a little bit out of line,” Trump told reporters at the White House on Wednesday, 9 April. “They were getting a little bit yippy, a little bit afraid.”

Trump also told reporters he was looking at the bond market as he made his decision.

“The bond market is very tricky,” he said. “I was watching it. But if you look at it now, it’s beautiful – the bond market right now. But I saw last night where people were getting a little queasy.”

Countries that were hit with the higher reciprocal duties that went into effect Wednesday will now be taxed at the earlier 10% baseline rate applied to other nations, with the exception of China.

Parsons said Trump’s unexpected decision to suspend the reciprocal tariffs for 90 days has prompted a strong rebound in financial markets and a modification of previous gloomy economic forecasts. 

“The decision now creates a welcome window of opportunity for many countries to negotiate with the US for lower tariffs, including South Africa,” he said.

So far, South Africa has taken a careful and pragmatic stance on the United States tariffs, saying it would be ill-considered and counterproductive to rush into imposing reciprocal tariffs on imports from the US.

“It’s a risky thing to do to simply decide that we’re now going to impose reciprocal tariffs. I think it is a race to the bottom,” Trade Minister Parks Tau said.

However, Parsons said South Africa must now “seize the moment in a transactional manner” and broker a better tariff deal in its trade flows with the United States. 

“For the automotive and agriculture sectors, in particular, there is much at stake for South Africa to use the 90-day period to seek to ameliorate the negative impact of high US tariffs on their exports to that country,” he said.

AGOA access

Parsons said South Africa’s negotiation stance with the United States should be based on the likelihood that the African Growth and Opportunity Act (AGOA) will not be renewed. 

AGOA is a United States trade program that allows eligible sub-Saharan African countries to export a range of products to the United States duty-free. 

South Africa has been a participant since the program’s inception in 2000 and is one of the programme’s largest beneficiaries. 

South Africa’s trade with the United States is made easier through the AGOA, which removes approximately 6,800 US tariffs to promote Sub-Saharan African exports to the United States.

The program has facilitated significant exports of South African goods, including automobiles, agricultural products, and industrial goods like chemicals and steel.

AGOA was initially enacted for eight years but has been extended multiple times. The most recent extension, in 2015, is set to last until September 2025.

Even before Trump’s re-election, many suspected that South Africa may lose its AGOA access.

This is because, technically, South Africa is a middle-income country and was, therefore, not meant to be a part of AGOA as the Act is specifically aimed at low-income countries.

However, concerns about South Africa’s continued inclusion heightened soon after Trump’s return to the White House, as the United States President has been severely critical of the country in recent months.

In particular, Trump has spoken out against specific government policies and legislation in the country, especially the new Expropriation Act.

Several African countries and the United States will hold talks in June or July on the AGOA. However, Tau has already warned that it will be “difficult” to save the AGOA, especially in light of Trump’s tariffs.

Therefore, Parsons said the probable pain of non-renewal or exclusion from the Act must be built into South Africa’s strategy when negotiating better trade terms with the United States.

“Countries like South Africa must, therefore, seek to get the best deal possible with the US,” he said. 

“All the same, in assessing how valuable this additional breathing space will be for further negotiations, it would be prudent to avoid excessive expectations as to its eventual outcomes.” 

He said there is still a high level of unpredictability in the United States’ tariff situation and in the erratic way in which decisions continue to be taken. 

“It creates persistent uncertainty around business decision-making regarding investment and supply chains, which promotes a ‘wait-and-see’ attitude,” he explained. 

“This is the overall policy environment within which affected nations will nonetheless need to negotiate with the US on tariffs and related matters.” 

The professor warned that bilateral negotiations may be distorted by the inclusion of non-tariff issues and may also drive a wedge between countries, elevating economic uncertainty. 

“Tariff uncertainty during the 90-period can be as economically damaging as tariffs themselves,” he said.