Foolish response to foolish US tariffs hurts South Africa: Ivo Vegter

Key topics:US raised tariffs on South African imports to 30%, hurting exporters and jobs.South Africa’s diplomatic stance hinders effective trade negotiations with the US.Ramaphosa’s export support may burden taxpayers, worsening the tariff impact..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Ivo Vegter*.Cyril Ramaphosa is about to make South Africa the first chump nation to validate Trump’s idiotic theory that tariffs are taxes on foreign countries.As of 1 August, with no trade deal in sight, the US raised its tariffs on South African products from the universal rate of 10% to a “reciprocal” rate of 30%.Based on some cockamamie formula based on an elementary misunderstanding of trade deficits, and the mistaken belief that a weaker dollar would benefit the US because it would make imports dearer for Americans and exports more affordable to foreign buyers, US President Donald Trump has pitched these tariffs as “taxes on other countries”.The new 30% rate for South Africa means that importers in the US must pay the US government 30% of the value of all goods imported from this country.Winners and losersThis is a win for the US government, of course. Trump’s tariffs amount to the largest tax hike on US citizens since 1993. The latest estimate from the Tax Foundation is that, as it stands, the US government will collect $2.1 trillion in revenue from tariffs over the next decade.What is great for a government is often bad for citizens, and so it is with tariffs. Preliminary estimates are that they will cost 0.8% of America’s GDP, a 0.7% reduction in capital stock, and the equivalent of 788 000 jobs. (I think those estimates are very conservative, but the US Court of International Trade has ruled, pending appeal, that many of Trump’s tariffs are unlawful, so perhaps they won’t last all that long.)Import tariffs are obviously bad for the importers, and consequently for their customers, as the price of imports, from raw materials to components to finished products, goes up.The notion that domestic producers will compensate is illusory: while some goods may be produced in higher volumes onshore, their prices will also rise, since tariffs protect them from competition from keenly priced imports (hence the term “protectionism”).More importantly, many tariffed imports cannot be produced in the US. That is especially true for many raw materials and agricultural products.Citrus fruitOne pertinent example is summer citrus fruit. In the northern hemisphere, peak citrus season is in the winter, from December to February. In the northern summer, the fruit trade turns to southern hemisphere producers, to ensure a year-round supply.The upshot is that placing a tariff on citrus imports from South Africa will do nothing to benefit the US, other than raising tax revenue, since US producers cannot take advantage of the higher import prices to magically produce citrus fruit in summer.The tariff is also bad for South African exporters, because their products will now be less price-competitive in the US, compared with imports that attract a lesser tariff, such as the 15% the US levies on imports from the EU.South Africa is the world’s second-largest exporter of citrus fruit after Spain, and the largest in the southern hemisphere, from where it can export counter-seasonally into northern hemisphere markets.Despite a bumper growing season, the US tariff will hit South African exporters, and their employees, hard. Although South Africa only exports about 5% to 6% of its citrus to the US, some rural centres are heavily dependent on exports to the US, accounting for a total of about 35 000 jobs. (I’m using citrus as an example here, but similar arguments apply to other major export industries.)NegotiationsThe Citrus Growers Association of South Africa (CGA) begged, in vain, for President Ramaphosa to facilitate at least an exemption for seasonal fresh produce, if a general trade deal was not possible..Read more:.Canada hits back against Trump with 25% counter-tariffs on $107bn US imports.The president, however, is not in a position to negotiate anything with the US, because he labours under the delusion that international diplomacy and trade negotiations are best conducted by people who abhor the countries to which they are deployed and take every opportunity to wag their fingers and insult their hosts from what they believe is the moral high ground.When the anti-American ambassador to the US, Ebrahim Rasool, was declared persona non grata for publicly insulting that country’s president, Ramaphosa thought it wise to replace him with a “special envoy”, Mcebisi Jonas, who had previously described Trump as a racist homophobe and a narcissistic right-winger, and also has serious conflicts of interests involving MTN’s allegedly shady business dealings in Iran.Jonas was not wrong about Trump. He is all these things. If you’re going to negotiate trade deals, however, it is best not to start by insulting your counterpart or their principal.As the National Museum of American Diplomacy says, “Diplomacy is the art and practice of building and maintaining relationships and conducting negotiations with people using tact and mutual respect.”Diplomacy is not the art of moral grandstanding and brutal honesty.The upshot is that South Africa is very poorly represented in the US, and in no position to negotiate trade deals with a hostile and capricious Trump administration.What to do?So, what is Squirrel to do? He can devote his weekly essay to the need to adapt and build resilience. He can extol the virtues of South Africa’s exports to the US, saying that they “ultimately benefit US consumers in terms of both choice and cost”.They do, but obviously Trump either doesn’t believe so, or doesn’t care. It is patently obvious that you cannot present a rational argument against an irrational position, and Trump’s position, based as it is on fundamental misconceptions about trade barriers and trade deficits, is irrational. That he is a stubborn narcissist hardly makes him more amenable to persuasion.He could argue that US citrus products are pretty terrible in the first place: “…production by US companies has been on the decline for a number of years as the US sector grapples with low yields, a citrus greening disease and other factors unrelated to competition from imports”.But we’ve seen how far insulting America gets us in trade negotiations.America FirstSquirrel can brag that “South Africa is also the biggest investor from the African Continent into the US, with 22 of our companies investing in a number of sectors including, mining, chemicals, pharmaceuticals and the food chain”.I can guarantee you that Trump doesn’t care about our 22 companies investing in the US.He can complain that “these measures will have a considerable impact on industries that rely heavily on exports to that country and on the workers they employ, as well as on our fiscus”.But neither our industries, nor their workers, and definitely not our fiscus, are matters of any concern to Donald Trump. His view is that America should quit subsidising the rest of the world, and that foreign interests likely conflict with American interests.His policy is “America First”. That implies nationalism and protectionism, and means that foreign affairs matter only inasmuch as they threaten or can benefit the US. It is an isolationist and nativist policy, satirised effectively by Dr. Seuss:.Deluding himself that Trump cares about South Africa’s interests is not going to work for Squirrel.“Support package”Ramaphosa correctly suggests that exporters ought to diversify, although the US accounted for only 7.1% of South Africa’s exports in June 2025, according to SARS. Losing some share of that trade is going to hit a few exporters hard, but it isn’t going to break the back of South Africa’s economy..Read more:.South Africa eyes trade in Africa and beyond to counter US tariff impact.To facilitate export market diversification, exporters will be delighted to hear that Squirrel has “established an Export Support Desk to assist affected producers”.What would we do without Export Support Desks, offering generous sinecures to another squadron of ANC cronies?Most alarmingly, however, Cyril announced: “We will in due course be announcing the modalities of a support package for companies, producers and workers that have been rendered vulnerable by the US tariffs.”A “support package”. That sounds suspiciously like taxpayer-funded subsidies. And by making the South African taxpayer pay for the negative impact of Trump’s import tariffs, Ramaphosa is validating Trump’s moronic belief that import tariffs are “taxes on other countries”.I didn’t think one could make a lose-lose situation worse other than by levying retaliatory tariffs, which most sensible countries, including South Africa, have hitherto avoided.By making South African taxpayers foot the bill for the fallout from America’s import tariffs, Ramaphosa has found a way. His moronic response to Trump’s moronic tariff policy suggests that the true depths of governmental trade stupidity have yet to be plumbed..*Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets..This article was first published by Daily Friend and is republished with permission

Foolish response to foolish US tariffs hurts South Africa: Ivo Vegter

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