Possible US tariffs on car imports might mean job losses in South Africa
The decision by US president Donald Trump within the next three months on whether or not to impose tariffs on the imports of vehicles and their components will have a significant effect on SA, and could result in job losses.
US embassy spokesperson Robert Mearkle confirmed that the US secretary of commerce Wilbur Ross had formally submitted the results of an investigation by that country's department of commerce into the effect of imports of automobiles and automobile parts on US national security, to the White House on February 17.
“President Trump has 90 days to decide what action, if any, is necessary,” Mearkle said.
The investigation which was launched in May 2018 was conducted under section 232 of the Trade Expansion Act, which authorises the US president to adjust imports tariffs if the imports are a threat to national security. Trump raised the tariffs on steel by 25% and aluminium by 10% following a similar section 232 investigation.
“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Ross said in a statement when the investigation was announced.
“The department of commerce will conduct a thorough, fair, and transparent investigation into whether such imports are weakening our internal economy and may impair the national security.”
Some reports suggested that Trump was pursuing tariffs upwards of 25% on cars, SUVs, vans, light trucks and automotive parts.
South African car manufacturers currently have duty-free access to the US market because of the African Growth and Opportunity Act (Agoa), a nonreciprocal preferential trade agreement between the US and some African countries.
The exit of BMW from the US market has seen a sharp decline in South African motor vehicle exports there. According to the National Association of Automobile Manufacturers of SA (Naamsa) the number of vehicles exported to the US declined from 53,606 in 2015 to 13,037 in 2018. This was because in 2018, the largest vehicle exporter, BMW, shifted production from the 3-Series — which it used to export to the US — to the X3 SUV, which is now destined for Europe.
However, a rise in tariffs could have a major effect on automotive component exports to the US.
National Association of Automotive Components and Allied Manufacturers executive director Renai Moothilal has warned that any new or raised import tariffs would have a negative effect on the components sector and was likely to result in job losses. He estimated that in 2017, the value of South African components exports to the US was just more than R4.2bn.
Components exported to the US included catalytic converters, engine parts, transmission components, cooling systems, automotive tooling, silencers and exhausts, as well as several after-market and replacement type components.
Trade and industry minister Rob Davies lobbied strenuously against the imposition of tariffs on SA's vehicle and components in Washington in 2018, pointing out that their imposition on South African exports would significantly erode the benefit the country was meant to enjoy under Agoa.
Department of trade and industry deputy director-general Xolelwa Mlumbi-Peter said in a briefing to parliament's trade and industry committee on Wednesday that the imposition of tariffs on South African vehicles and components would have significant implications for SA.
According to Mlumbi-Peter total trade between SA and the US increased from R129.9bn in 2013 to R161.4bn in 2017.
South African exports to the US - helped by Agoa - grew from about R67bn in 2013 to R88.6bn in 2017. US exports grew from R63bn to R72.8bn resulting in a slight trade surplus in favour of SA.
Read related news articles
New government of national unity gives South Africa a honeymoon period for keeping its AGOA status, say analysts
New Trade and Industry Minister Parks Tau is fighting for South Africa's continued participation in AGOA at the AGOA Forum in Washington this week. The formation of the Government of National Unity (GNU) has secured South Africa a “honeymoon period” for retaining its privileged access to US markets under the African Growth and Opportunity Act (Agoa). This is the view of US politicians and South African trade analysts on the eve of the...
23 July 2024
South Africa plans US mission to lobby against US review of ties
South Africa’s newly formed government will use an upcoming forum on US preferential trade access to push back against a Senate review of ties between the two countries. The House of Representatives last month passed a law requiring a full assessment off bilateral relations and submitted it to the Senate for approval. South African business lobby groups have warned the legislation threatens to curb trade with the world’s biggest economy...
15 July 2024
How access to US market changed the fortunes of two South African sisters
Two entrepreneurs take traditional African designs and sustainable materials and turn them into international success What started as a pastime desire to sell crafts at local markets, deeply rooted in the South African culture, has since blossomed to become an international business entity for two local women.It took the Mokone sisters, Morongwe "Mo" (37) and Michelle (34), three years only to turn around their home decor business into an...
01 July 2024
South Africa walks a tightrope on US relations
South Africa has been conducting a high-wire act in its relations with the United States (US). It is maintaining friendships with Washington’s enemies like Russia, Iran and China while trying to avoid disrupting its economic relations with America. Tensions came closer than ever to breaking point this month as the US House of Representatives’ Committee on Foreign Affairs passed the US-South Africa Bilateral Relations...
28 March 2024
Remarks by Deputy Treasury Secretary Adeyemo on the US-South Africa economic relationship
As Prepared for Delivery in Johannesburg, South Africa Thank you for the warm welcome. I want to express my gratitude to Consul General Spera and the American Chamber of Commerce for hosting me. I am honored to be joined today by South African Entrepreneurs that are building companies to unlock the economic potential of their country. I owe my own presence here today to the inspiration I drew from South Africa. In the middle of the...
13 March 2024
South African president Ramaphosa meets with US congressional delegation
South African President Cyril Ramaphosa today, 21 February 2024, received for a visit from a bipartisan congressional delegation from the United States of America, in Tuynhuys, Cape Town. The delegation is visiting South Africa at the invitation of the Aspen Institute. The President and the US congressional delegation discussed the importance of the relationship between South Africa and the US, which manifests in strong economic,...
21 February 2024
US congress receives Bill to review South Africa relations
A bill has been submitted to the United States congress calling for a full review of the country’s bilateral relationship with South Africa following the International Court of Justice ruling that found it plausible that Israel has committed acts of genocide against Gaza. The bipartisan bill which was introduced by US Republican congressman John James and Democratic Party congressman Jared Moskowitz this week could threaten South...
09 February 2024
Fitch research unit expects better AGOA deal for South Africa
Fitch’s research arm, BMI, believes SA has done enough to get improved trade terms under the African Growth & Opportunity Act (Agoa), which it expects to be extended and modified before its expiry in September 2025. But it warns that the deal might be stillborn if Donald Trump is elected US president. The research think-tank said in a note it assigns a 65% probability that Agoa will not only be renewed but modified to the benefit of...
09 January 2024
South Africa: BLSA CEO calls for more companies to leverage AGOA opportunities
Many more South African companies could benefit from the African Growth and Opportunity Act (AGOA), which gives eligible countries access to US markets free of tariff barriers, business organisation BusinessLeadership South Africa (BLSA) CEO Busi Mavuso writes in her weekly newsletter. Apart from mainstream formal sector businesses, there are opportunities to enable more entrepreneurs, including women-led...
20 November 2023
US ambassador: AGOA is an opportunity to deepen ties between the US and South Africa
President Joe Biden last December at the US-Africa Leaders Summit affirmed that the US will elevate its relationship with Africa. The future is Africa. One example is its youthful population: the median age on the continent is 19. By 2050, one in four people in the world will be in Africa. The US wants them to be healthy and wealthy. What happens in Africa will affect the rest of the globe — and we want to work together to ensure it is...
09 November 2023
US Senator Chris Coons proposes AGOA extension by 16 years, immediate review of SA’s AGOA eligibility
Powerful US Democratic Party Senator Chris Coons is circulating a discussion draft of a Bill to renew the African Growth and Opportunity Act (Agoa) for 16 years that would also require an immediate “out-of-cycle” review of South Africa’s eligibility for Agoa. That could lead to South Africa being removed next year from the programme, which has provided considerable benefits to SA exporters to the US of cars, fruits and wine, in...
07 November 2023