The South African tariff win that changes nothing

This article was first published by The Common Sense.The US Supreme Court just handed South Africa a tariff cut — from 30% down to 12.5% — but economist Bheki Mahlobo says it barely moves the needle. With US-bound exports making up a fraction of total trade, and deeper issues like property rights and port failures untouched, the real growth blockers remain. Is South Africa celebrating a win it hasn't actually earned?.By Bheki Mahlobo for The Common Sense.Much has been made of the fact that United States (US) tariffs on South African exports are set to drop from 30.0% to 12.5%, but the effect will do little to lift South Africa's economic prospects.The US Supreme Court’s decision in February to strike down President Donald Trump’s use of the International Emergency Economic Powers Act to force high trade tariffs on some of America's trade partners will cause those tariffs to expire in July, following which South Africa’s tariff exposure is set to fall from 30.0% to 12.5% (unless Washington replaces it with a new framework approved through Congress).The South African government has long sought to delay and obfuscate tariff negotiations with the US in the hope that the US Supreme Court would strike down the tariffs, leading to a lower tariff regime for South Africa. That is now playing out exactly as the South Africans had hoped, but this “win” is largely an empty one and will do little to turn the South African economy around.The reason is that a very small share of South Africa's exports go to the US via programmes that are affected by tariffs. Even the much-vaunted African Growth and Opportunity Act (AGOA) programme accounts for just 2.5% of all South Africa's exports.Higher US tariffs have disrupted South African exports to America, contributing to a sharp drop in year-on-year shipments to the US. The automotive and agricultural sectors bore the brunt of the initial trade barriers, with US-bound vehicle exports, for example, plunging by over 50.0%.That was, however, not universally true for South Africa's exports.South Africa’s minerals sector, including vital technology and automotive inputs such as platinum and titanium, remained largely exempt due to heavy American reliance on these raw materials.Before the 30.0% tariffs, precious metals, vehicles and transport equipment, and base metals accounted for roughly 70.0% of South Africa’s exports to the US.For those industries that were directly affected, the reduced tariff regime may bring some relief, but in terms of lifting the outlook for the broader South African economy the effect will hardly be noticeable.Even before the Trump tariff regime, the South African economy was struggling to maintain a growth rate much above 1.0% of GDP, even as its emerging-market peers were closer to 4.0%.The reason is that South Africa’s empowerment and property rights policies are fundamentally hostile to investment, while little is being done to address local rail and port snarl-ups.Empowerment and property rights were some of the exact issues that the Americans wished South Africa to address, but which Pretoria has refused to do.The domestic investment climate in South Africa will remain broadly in line with what it was before the reduction in tariffs, and as a consequence the fixed investment rate will remain near its current lows – and that rate directly determines the rate of economic growth..Read more:.South Africa eyes trade in Africa and beyond to counter US tariff impact.Sources in Washington tell The Common Sense that the South African government's attitude towards Washington, and its unwillingness to address US investment concerns, means that the prospects of securing a new investment pact with America, of a scale able to lift the rate of economic growth, remains pretty much out of reach..This article was first published by The Common Sense and is republished with permission..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 every morning on 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.

The South African tariff win that changes nothing

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