In a strategic pivot to safeguard its economy, the South African government has announced that it is exploring new trade partnerships with Turkey and other untapped markets following the United States’ decision to impose 30 percent tariffs on all South African imports, effective August 8. These significant tariffs move could reduce South Africa’s GDP by 0.2 percent, prompting immediate action by the government.
US tariffs trigger urgent policy shift
According to a joint statement from South Africa’s Ministry of International Relations and Cooperation and the Department of Trade, Industry and Competition, the country has been in talks with the US to improve trade relations and address the trade imbalance. However, the newly imposed tariffs, which are viewed as unjustified by South African officials, have forced the country to accelerate diversification plans.
South Africa argued that its exports, which account for 0.25 percent of the US import mix, do not pose any threat to US national security or industry. Rather, its goods serve as critical inputs for the US industrial base. The government also pointed out that the US-South Africa trade deficit figures ignore America’s significant surplus in services.
Deep bilateral ties at risk
The joint statement emphasized that South Africa is more than just a trading partner, it is also a substantial investor in the US economy. South African investments support American jobs, while over 600 US companies operate in South Africa, contributing to local employment and industrial development. Despite the new policy, South Africa’s objective is to sustain and expand these mutually beneficial ties.
Exemptions and economic fallout
While certain South African exports, including stainless steel scrap, energy products, semiconductors, and key minerals, are exempt from the new tariffs, the broader economic impact is likely to be significant. Since 2018, South Africa has already navigated the challenges of Section 232 tariffs on steel and aluminum. However, the latest move adds further uncertainty to its export landscape.
Government response: Diversification and support programs
To counter the effects, South Africa is deploying a multifaceted response:
- Diplomatic channels: ongoing negotiations with the US aim to reach a mutually acceptable agreement.
- Domestic economic measures: an export support desk to help companies identify alternative markets. Incentive programs via a Localization Fund and the soon-to-launch Export and Competitiveness Support Program (ECSP). Labor department collaboration to mitigate job losses.
- A block exemption to enable joint infrastructure efforts among exporters.
Strategic shift toward emerging markets
The South African government emphasized its progress with the EU, China, Thailand and Japan in securing new trade and investment deals. In addition, significant progress is being made in high-growth markets throughout Asia and the Middle East, with particular focus on the UAE, Qatar, and Saudi Arabia. In response to current challenges, it is actively leveraging frameworks like the African Continental Free Trade Area (AfCFTA) and pursuing closer ties with ASEAN nations and Turkey.