- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/Possible US tariffs on car imports might mean job losses in South Africa

Possible US tariffs on car imports might mean job losses in South Africa

Possible US tariffs on car imports might mean job losses in South Africa
Published date:
Friday, 01 March 2019

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

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

AGOA benefits extend beyond trade [incl. VIDEO of Friday's opening session]

Economies in Sub-Saharan countries stand to benefit far more from the African Growth and Opportunity Act (AGOA) than notable trade statistics, says President Cyril Ramaphosa. “AGOA enhances the diversification of African economies, enabling them to export value-added products. By enabling African countries to have preferential access to the US market, this opportunity incentivises African countries to develop and export value-added goods...

06 November 2023

South Africa pins its hopes on an early 2024 US Congress renewal of AGOA

South Africa’s government is hoping that the process to renew the African Growth and Opportunity Act (Agoa) by the US Congress will be concluded by early 2024, ensuring that more than 20 African countries continue to have duty-free access to the world’s largest economy.   This is the first time that the South African government has given a timeline for when it hopes the US Congress might extend Agoa, which has been renewed twice...

05 November 2023

SA trade minister Patel expresses confidence at media briefing about South Africa’s continued inclusion in AGOA

Ahead of South Africa hosting the US-AfricaTrade and Economic Cooperation Forum – also called the AGOA Forum – from November 2 to 4, Trade, Industry and Competition Minister Ebrahim Patel on October 26 briefed the media on the state of readiness for the forum, expressing confidence that the South African government’s relations with the US were strong. Various South African stakeholders have been motivating for...

26 October 2023

Business Leadership SA calls for business to capitalise on South Africa’s hosting of AGOA Forum

It is notable that South Africa will still host the African Growth and Opportunity Act (AGOA) Private Sector Forum next month, given that several US lawmakers have called for it to be moved elsewhere, and have questioned the country’s preferential trade terms with the US under Agoa as such preferential access to the US markets is open only to African countries that do not threaten American security interests. This is...

24 October 2023

'South Africa expected to retain its AGOA status despite differences with US'

It is almost certain that South Africa’s Agoa status will be renewed despite it and the US often being on opposite sides over geopolitical crises in the past year. The eligibility of countries for the US’s African Growth and Opportunity Act (Agoa) has been under review during the past few months, and it is becoming clearer that South Africa is one of the countries that will continue being a part of the trade programme. A strong...

19 October 2023

South Africa: Entrepreneurial sisters venture into US market [WATCH]

It was a drive to explore international trade that saw entrepreneurial sisters, Michelle and Mo Mokone, grabbing an opportunity to venture into the United States of America market. The pair are the co-owners of Mo’s Crib, a company that produces a range of handmade home décor products.  Their product range includes handwoven baskets, planters, trays, wall art and home outdoor items. It was in 2021 that the pair decided to take...

09 October 2023

You are here: Home/News/Article/Possible US tariffs on car imports might mean job losses in South Africa