Trump's latest shock move threatens South African car manufacturers
- President Donald Trump is considering slapping tariffs on imported cars and trucks.
- The US imported almost 37,000 cars from South Africa last year.
- SA exports to the US are duty free at the moment, thanks to the African Growth and Opportunity Act.
- But Trump has disregarded AGOA, evident from his decision on South African steel and aluminium exports.
The latest target in President Donald Trump's ongoing trade fight is imported cars and trucks.
Trump said earlier this week that the US Commerce Department is investigating possible trade actions on imported vehicles, and the administration is reportedly mulling a 25% tariff, or tax on imports, for the cars.
US imported almost 37,000 cars from South Africa last year - it was the second biggest importer of SA vehicles, after the UK (54,400). In 2016, South Africa exported vehicles worth $1.6 billion to the US (R23.5 billion). Ford and Volkswagen plants in South Africa export vehicles to the US.
Currently, because of the African Growth and Opportunity Act (AGOA), South African car manufacturers have duty-free access to the US market. AGOA was launched under then president Bill Clinton in 2000, and South African car manufacturers have reaped enormous benefit over the years.
But Trump has disregarded AGOA. Recently, his government refused to exempt South Africa from new import duties on steel and aluminium exports. The European Union, Mexico, South Korea, Australia, Argentina, Brazil and Canada were exempted. Previously, SA steel and aluminium were imported duty free under AGOA.
Trade experts now believe that AGOA probably won't be renewed in 2025.
His latest announcement on vehicle tariffs was widely condemned by US trade allies. Trade experts say Trump could be pushing the US into a trade war. But, it's likely that some trade partners are more worried than others.
Almost all of the top 10 countries that could get hit hardest by Trump's move maintain relatively close trade ties with the US:
Unsurprisingly, the top two sources of imported vehicles are the other members of the North American Free Trade Agreement, or NAFTA: Mexico and Canada. Canada sends the most people-moving vehicles to the US, while Mexico sends the most goods-moving vehicles.
Trade analysts surmised that the tariff announcement may actually be Trump's attempt to pressure these two countries in the NAFTA renegotiation.
One of the biggest sticking points in the talks is the treatment of cars moving between the countries. The US wants to tighten rules, while Mexico and Canada want to keep the rules closer to the current system.
Trump appeared to link the impending action with the NAFTA negotiations prior to the formal announcement while speaking to reporters on Wednesday.
"I think your autoworkers and your auto companies in this country are going to be very happy with what's going to happen. You'll be seeing very soon what I'm talking about," Trump said. "NAFTA is very difficult. Mexico has been very difficult to deal with. Canada has been very difficult to deal with."
Following the NAFTA nations are Japan, Germany, and South Korea. Officials from all three countries have expressed concern about the potential tariffs. The move is perhaps less surprising given the president's decades-long problems with Japanese imports to the US and recent comments blasting the European Union for their auto restrictions.
The Trump administration must still conduct a weeks-long investigation into auto imports before imposing any sanctions.
Additional reporting by Bob Bryan, Business Insider US. A reference to BMW was removed: BMW SA does not export vehicles to the US.
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