The US government has lumped South Africa together with China, its arch trade nemesis, in the latest battle of its global trade war.
On Tuesday, the SA department of trade and industry announced that – unlike the European Union, Mexico, South Korea, Australia, Argentina, Brazil and Canada - SA will not be exempted from painful taxes on its steel and aluminium exports to the US.
Recently, president Donald Trump slapped import duties of 10% on all aluminium imports and 25% on steel. Countries – including South Africa - furiously lobbied the US government to be granted exemptions.
Trudi Harzenberg, executive director of the Stellenbosch-based Trade Law Centre (tralac), says there was a lot of behind-the-scenes canvassing. Australia reportedly even used the sporting great Greg Norman to court the golf-mad Trump.
It paid off for Australia, and others. But South Africa, along with China, India and Russia, will have to pay the duties.
Previously, because of the African Growth and Opportunity Act (AGOA), South African aluminium exporters had duty-free access to the US market. AGOA was launched under then president Bill Clinton in 2000, and South African exporters – particularly car manufacturers – have reaped enormous benefit over the years. Some 6,700 SA export products are exempted from duties.
But the latest move from the US is a further indication that AGOA may not be renewed in 2025, says Hartzenberg.
Trump’s action also creates uncertainty as regards to future trade policy interventions, says Hartzenberg. "There may even be a possibility that vehicle imports may be targeted, to support the US automotive industry." Steel and aluminium prices are already being pushed higher due to the import duties in the US, which will have an impact on the prices and competitiveness of our exported vehicles.
For now, the biggest pain will be felt in SA’s steel and aluminium industries, which are critical to our economy, says Hartzenberg. While SA steel exports represent less than one percent of US steel imports, the US takes 5% of SA’s production. An estimated 7,500 jobs are dependent on US steel exports alone.
In a statement on Tuesday, the dti said that SA products will probably be “displaced” out of the US market in favour of the exempted countries.
Hartzenberg thinks the import duties may impact investment in projects like the Hillside aluminium smelter in Richards Bay, the largest producer of primary aluminium in the southern hemisphere. It is owned by the Australia-based South32, which will not face the same US import duties as its SA subsidiary.
The duties also directly impact Pietermaritzburg-based Hulamin, which supplies overseas companies with ultra high-end aluminium products, including parts for the electric car manufacturer Tesla. It is also the only supplier in the world that can produce plates for a crucial fitting that enables WiFi connections on aircraft. In the past financial year, North America represented a fifth of Hulamin’s sales.
The next salvo will be fired at the World Trade Organisation. China has launched a dispute against the US steel and aluminium duties at the WTO. It will be interesting to see if South Africa follows the EU, who has requested to join the consultations between the US and China in the WTO dispute settlement process, says Hartzenberg.
SA is 'collateral damage'
For its part, the dti said that US duties “are implemented in a way that contravenes some of the key WTO principles”.
“South Africa finds itself as collateral damage in the trade war of key global economies. South Africa is concerned by the unfairness of the measures and that it is one of the countries that are singled out as a contributor to US national security concerns when its exports of aluminium and steel products are not that significant,” it added.
US plans to cut aid to SA
The US decision not to exempt SA from import duties comes after its recent announcement that it wanted to cut foreign aid to countries like South Africa who don't vote with it at the UN. According to a list compiled by the US, South Africa voted with the US on nine occasions and against it 68 times. Along with countries like North Korea and Cuba, it was singled out as one of the 10 countries with the "lowest voting coincidence with the US".