The US’s imposition of 30% import tariffs on goods from countries around the globe have dominated business headlines this year, with a number of analysts, including at the Reserve Bank and the JSE, forecasting only a modest impact on South Africa’s GDP and growth prospects.
As a local business chamber in Nelson Mandela Bay, we have been presented with numerous analyses, insights, forecasts and the like from a range of economic and trade experts, on the potential impact of these tariffs.
While some dismiss the impact of the tariffs due to the fact that only about 7.5% of our total annual exports go to the US, and that about a third of these are exempted from the 30% tariff (including strategic minerals and, most recently, oranges), this view misses the depth and breadth of the local economic links in the manufacturing value chain, and how local manufacturers are affected by the shifts in global trade relationships and supply chains as a result of the tariffs.
It is widely accepted that the automotive and agriculture sectors are the most vulnerable to the impact of the US tariffs. These are also the sectors on which the Eastern Cape is most reliant in terms of employment and value added to the regional economy.
The Sundays River Valley is the country’s largest single citrus production area, and the Eastern Cape is also the largest dairy and wool producer in South Africa. Agriculture is a significant employer, accounting for 90,000 direct jobs in the province (6.2% of employment), including 3,000 direct jobs in the Bay. This excludes the further impact on employment of agro-processing, retail and trade, transport and logistics.
The Bay and the Eastern Cape are the hub of the automotive sector, with more than 53% of the country’s vehicle exports originating from the Eastern Cape, while more than 40% of South Africa’s automotive employment and almost half of all automotive component production is concentrated in Nelson Mandela Bay.
The automotive sector directly employs about 115,000 people and an estimated 500,000 are employed in suppliers of goods and services to manufacturers, transport and logistics, dealerships, service and fitment centres, and aftermarket parts and accessories suppliers.
This creates further local economic impacts in terms of the spending power of businesses which supports local wholesale and retail trade, financial services, tourism and hospitality. Each employed breadwinner supports about 10 people in extended families and communities as well as spending their income in local businesses.
Superficial analysis limited to the direct impacts of the US tariffs does not appreciate the breadth and depth of the socioeconomic impact of the manufacturing and agricultural sectors.
South Africa’s automotive exports to the US have taken a deep dive, while agricultural exports have held fast, although the tariffs only hit the citrus industry at the end of their season, and many scrambled to get produce to the US before the tariffs took effect, so the true impact will only be seen in the 2026 season. We do, however, hope that the exemption for oranges will remain in place and that this will be expanded to include mandarins and other products.
Agricultural exports to the US grew by 19% and 26% in Q1 and Q2 respectively this year, with a slight dip in Q3, amid an overall 10% increase in agriculture exports to all destinations.
Overall South Africa’s global automotive exports are tracking 6.7% higher than in 2024, despite an approximate 80% drop in exports to the US in the first half of the year. Growth has mostly been driven by vehicle exports to the UK and European markets.
On the face of it, it may thus seem that the impact of the US tariffs is low – but the indirect impacts are being overlooked.
The US tariffs have upended the global trading order, shifting from a free trade environment to increasing isolationism and protectionism as countries respond to the tariffs with counter-tariffs and seek to protect their own economies.
In the automotive sector, for example, many component manufacturers not only sell directly to US vehicle manufacturers but also to other countries as input for their vehicles exported to the US. Those volumes are under threat as the tariffs impact on our trading partners.
Responding to the impact of tariffs, countries that used to export to the US are now turning their attention to new markets, particularly in Africa. South African vehicle and component manufacturers and aftermarket parts suppliers are now experiencing increased competition in the African market from countries we did not previously consider to be competitors.
As US manufacturers increase their local production capacity to counter the impact of increased import tariffs on their input costs, European exporters to the US are experiencing declines in demand. This has a two-way impact for South Africa – decreased demand for our inputs into European production for the US market, while excess production due to declining US demand finds its way into our markets in competition with locally manufactured components.
Another example of unexpected, indirect impact is on South Africa’s auto component exports to Mexico, worth R3-billion annually, mostly as parts of a sub-assembly for vehicles manufactured in Mexico, which exports 70% of its vehicles to the US.
As the tariffs into the US raise the cost of Mexican-made vehicles, along with more onerous requirements for exemptions under the United States-Mexico-Canada Agreement, this is likely to affect orders for Mexico’s manufacturers and increased cost pressures. Lost business to the US for Mexico will in turn impact South African component manufacturers and exporters of goods vehicles.
Simply redirecting South African exports to other markets, the “immediate” solution recommended by most commentators, is not as simple as it sounds. This takes negotiations at both government and individual business level to reach trade agreements and secure orders, respectively.
Increasingly protectionist stances of other countries make this more difficult, underscored by the fact that South Africa has yet to secure substantial new trade agreements despite much positive sentiment.
The marketing and lobbying required comes at a cost. As does meeting the requirements of a new country trading partner or customer – these can range from technical specifications and emissions standards of automotive components or other manufactured goods, to phytosanitary and food quality standards for fresh produce, meat and food products, and fair trade and environmental conservation certifications.
Securing reliable logistics channels to get products to the new market or customer is another hurdle, dependent on the scheduling and space availability of air and sea freight carriers.
This is not an exhaustive list, just an illustration of the mire of red-tape to navigate in accessing new markets and getting actual products to those markets and customers. It is not an overnight exercise, and it comes at a cost.
Add to that the cost and time involved of retooling production lines or adapting farming practices to meet the requirements of new customers – all the way through to adapting packaging of vehicle parts, oranges, wool or tomato juice to the different materials, size and volume requirements of different countries. What we consider a “standard size” or acceptable labelling in South Africa for a tyre, a carton of fruit, a wooden door or a bottle of wine, for example, is not necessarily the standard in other countries – another hoop for local producers to jump through as they attempt to get their goods into diverse markets.
In addition to the impacts of the US tariffs and countermeasures adopted by other countries, local manufacturers and agricultural producers face further issues around ineffective policy urgently in need of updating to protect local industry, along with the well-known issue of basic municipal service delivery failures.
There is a lot that can be done to reverse the impact of these punitive and retaliatory tariffs on South African manufacturing and agricultural production and processing – but an understanding of the deep economic and social ecosystem impacts is needed first. Superficial, factory-gate analyses are not going to help us forge a path that benefits our country and our people. DM
Denise van Huyssteen is chief executive officer of the Nelson Mandela Bay Business Chamber.