Eastern Cape finance MEC Mlungisi Mvoko this week spelt out to parliament’s finance committee the dire effect on the province of President Donald Trump’s imposition of a 30% tariff on SA exports to the US.
It deals a blow to key export industries. For the Eastern Cape, a key industry that will be affected is vehicle manufacturers with export ties to the US. And, of course, the knock-on effects on vital component export.
The result, Mvoko says, is a strong possibility that Mercedes-Benz SA — which exports almost 90% of its cars to the US — might close its East London factory.
It would be a terrible blow to the province resulting in immediate massive job losses. With unemployment already at a staggering 39.3%, job losses are something this province can ill afford.
While Mvoko did not specifically refer to it, there is also the Eastern Cape’s citrus industry which will likely be hard hit.
The effect on the rest of the country will also be severe but may not be as immediate or catastrophic.
As diplomats point out, the first step must be to avert the pending crisis with immediate diplomatic and other action.
Negotiating a reprieve or a lesser tariff would be a good start and no doubt lobbying has already begun.
But the problem is that Trump’s posturing and muscle-flexing has more to do with power than trade.
He imposed punitive tariffs on many countries knowing full well the devastating effects on them and, ironically, in some cases on his own country.
He doesn’t care. Appealing to common sense or his better nature will likely yield little in the form of a long-term reprieve.
And so, SA — and indeed all Brics nations — should follow the example of Canada.
Diversify and find new markets and do so as quickly as possible. Canada shrugged him off and turned its focus to Asia and Europe.
While it may not be as simple for SA, it cannot simply continue to rely on US markets.
SA should follow the example of Canada and diversify and find new markets
Brics potentially represents a powerful economic bloc which currently comprises 10 countries.
Yet, the Industrial Development Corporation points out that the composition of SA’s export basket to the Brics countries has barely changed since 2009.
Brics issued a statement this week expressing serious concerns about the rise of unilateral tariff and non-tariff measures which it said distorted trade.
But if Brics countries turned to one another and mutually supported market diversification and trade between them, it could go a long way to ameliorate the effects of Trump’s tariffs while creating a new market dynamic in which all Brics nations became less dependent on the market vagaries introduced by Trump.
Daily Dispatch
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