South Africa Auto Industry in Bid to Fight Off U.S Tariffs

Reuters 

An alliance of auto manufacturers and dealers in the United States is undertaking a major effort to oppose the tariff plans launched by U.S. President Donald Trump, with South Africa also adding its voice of opposition at a U.S. Commerce Department hearing.

Over the last decade, exports of vehicles made in South Africa have reached as high as two billion U.S. dollars each year. This was made possible by the duty-free benefits of a U.S. initiative known as the African Growth and Opportunity Act (AGOA), but a proposed 25-percent tariff on U.S. imports threatens to now wipe out that advantage.

Since Trump came to office last January, exports of South African-made vehicles and parts have started to fall into decline. German car-giant BMW, which has a major manufacturing plant in the Rosslyn suburb of Pretoria, just ended the manufacture and export of its “3 Series” sedans to the U.S. port of Baltimore, where up until recently it was sending 166,000 each year.

I don't know what demand in America will be for South African goods in six months, 12 months. So what I might do is not make an investment, not commit to a purchase, and ultimately this brings this global economic recovery that we've been experiencing to a grinding halt, potentially. People are nervous about that.

Economist Anirban Basu says Trump’s combative approach is undermining confidence.

“I don’t know what demand in America will be for South African goods in six months, 12 months. So what I might do is not make an investment, not commit to a purchase, and ultimately this brings this global economic recovery that we’ve been experiencing to a grinding halt, potentially. People are nervous about that. Stock markets around the world are nervous about that. And that’s not good for a port,” said Basu, who is also chairman and CEO of the Sage Policy Group, an economic and policy consulting firm based in Baltimore.

Baltimore’s deep water port provides a perfect location to roll off massive cargoes of finished vehicles, meaning new tariffs could jeopardize growth and investment in the United States as well as South Africa.

As for other major car makers, Ford is still sending 8,500 cargo van engines each year from a facility in Struandale, near the South African coastline, while Mercedes-Benz is still exporting from the city of East London on the Eastern Cape.

But experts believe the recent uncertainty means South Africa should shift away from the American market, including economist and former U.S. trade official Sherman Robinson.

“Deepen your relationships with East and Southeast Asia and with the EU, they are your major markets now. In the short run, it’s very expensive, it’s costly to adjust. And so you probably do whatever you can to minimize the shock. But [in] long run you need to be planning to diversify,” said Robinson, who serves as a senior fellow at the Peterson Institute for international economics in ‎Washington, D.C..

The Alliance of Automobile Manufacturers which represents many foreign and domestic brands is strongly urging Trump to abandon the tariff plan, warning it will threaten jobs, raise costs for consumers and undermine the U.S.’ global competitiveness.