US tariffs will ‘shift alliances’

South Africa is among countries reeling from US President Donald Trump’s latest raft of tariff hikes, but the economic squeeze is likely to be a strong catalyst for realignment of allies, markets and opportunities, experts say.

Trump’s sweeping tariffs on US imports, which also include American allies Israel and Taiwan, have sparked global condemnation, with some countries threatening retaliation. US total goods trade with the European Union (EU) was last year estimated at $975.9 billion (about R18 trillion), while with Canada it was $762.1 billion – a picture analysts said could change.

According to political economist Dale McKinley, Canada and European countries will be among those scrambling for new markets and opportunities, affecting trade with the US.

“US tariffs are certainly going to become a catalyst for realignments. Obviously, affected countries are going to try to engage the Trump administration for exceptions on tariff hikes.

“You either grow your markets and maintain them or replace those that you are going to be losing in the US.

“Most realignments are likely to be on the economic front. But I do not see them in the shorter term necessarily resulting in political realignments.

“Due to the new economic relationships and expansion of markets, you cannot rule out people being brought together on the political front,” said McKinley.

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The US, said McKinley, would not be spared by the double-edged sword of Trump’s global tariff hikes.

“The most important impact on the US economy is that prices will rise on a range of different items – vehicles, food or technology.

“The US relies heavily on South Africa for minerals. If there is no exemption on that, it is going to make a range of things expensive.

“Platinum or manganese are components in many different manufactured goods and larger scale industrial use.

“It is going to mean higher prices, leading to the US economy tipping into recession. Spending in the US economy is going to be less, with more people reticent to go on spending sprees.

“There will also be less availability of credit and less growth in the US economy.

“We will also see the impact of this on interest rates and inflation, because of policy uncertainty.”

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He said South Africa should “start being creative and working hard to find other markets and realignments”.

“On the diplomatic and trade negotiations front, it will be about making new friends and coalitions,” he added.

Professor Raymond Parsons, of the North-West University Business School, said the scale of further wide-ranging US unilateral tariff hikes would “not only drive a huge wedge into the world’s multilateral trading system, but it’s bad news for the SA economy”.

“The international impact of much higher US tariffs, will be disruptive of global value chains – inviting retaliation, igniting inflation, dampening global economic growth and prompting repricing of risks in financial markets,” said Parsons.

He said there would be “many more losers than winners”.

“Some economies may be brought to the brink of recession, with accompanying job losses and even social dislocation.

“High tariffs of 30% on SA exports to the US are also a serious headwind for the country.

“SA needs a calm and pragmatic approach driven by evidence-based homework.

“The automotive sector will be particularly hard hit.

“To manage higher US trade tariffs, SA must mobilise the necessary economic diplomacy to try to offset the economic damage and stabilise the situation.

“Given President Trump’s reciprocal approach to tariffs, SA must see what trade adjustments might be made to win concessions to ameliorate the situation,” added Parsons.

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SA must also seize the moment to begin to identify alternative markets as the US withdraws behind protectionist barriers. The isolationist direction of US trade policy is now clear and is the “new normal”.

The African Continental Free Trade Agreement is “one ready mechanism that seeks to reduce existing barriers to intra-Africa trade. African economies should be given priority”.

Independent political analyst Sandile Swana said: “The biggest challenge to the world is the emergence of US unilateralism, which was in the past disguised, with Europeans keeping quiet.

“Today, nobody in Europe or any part of the world wants to be part of a unipolar world.

“A lot may become clearer when Trump takes over the chair of the G20 – whether he will advocate for the dismantling of the G20 or more shared responsibilities in the G20.

“SA is already in good books with the G20 and the European Union which see SA as the strong voice of the South.”