FILE PHOTO: US President Donald Trump. US President-elect Donald Trump has threatened to impose punitive tariffs on imports from BRICS member state. Photo: Reuters
US President-elect Donald Trump has threatened to impose punitive tariffs on imports from BRICS member states, potentially putting billions of rand of South Africa’s exports at serious risk.
This warning comes at a time when South Africa’s trade surplus was the highest in three months, showing signs of economic resilience.
Trump posted on social media on Saturday that his administration will punish BRICS Member States who are trying to de-emphasise the US dollar as the world’s reserve currency.
“We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US dollar or, they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful US economy,” Trump said.
“They can go find another “sucker!” There is no chance that the BRICS will replace the US dollar in international trade, and any country that tries should wave goodbye to America.”
This comes as the BRICS+ bloc recently agreed to expand intra-trade using domestic currencies. While there have been hesitations about establishing a common BRICS currency, the dialogue surrounding it garners attention amidst fears of economic reprisal from the US.
Donald MacKay, the CEO of Global Traders Advisors, yesterday expressed scepticism over the viability of a BRICS currency, also suggesting that Trump's threats are an impulsive reaction rather than a well-considered economic strategy.
“I think it would be well-nigh impossible to set up a BRICS currency,” MacKay said.
“But I don't think Trump is having a technical conversation on whether there really are economic merits to putting this together. I think he's responding in an aggressive way, as he often does, because he doesn’t like the conversation about any other currency topping the US as the world's reserve currency.
“However, tariffs have to be imposed by Congress in the US. It's absolutely not clear to me that a 100% tariff could be imposed just for countries essentially having a conversation about this. So if I had to bet, which I probably shouldn’t, given that Trump is not the most rational person, I would say it is unlikely that we see a 100% tariff on BRICS members.”
If tariffs were to be imposed, the repercussions could be significant for South Africa, which sees approximately R180 billion in annual exports to the US, predominantly in mineral resources.
MacKay estimated that a substantial tariff on mineral exports alone could threaten around R90bn worth of trade, with the potential removal of the African Growth and Opportunity Act (Agoa) benefits compounding the effects. The AGOA currently saves South African exporters around R2bn annually in duties.
While many still voice optimism regarding Congress's capacity to implement such severe tariffs, the unpredictability of Trump's administration raises caution.
Two weeks ago, Trump threatened 25% tariffs on Mexican and Canadian goods while imposing a further 10% on Chinese products, underscoring a broader trend of protectionist policies that economists believe could stifle global trade growth.
Nolan Wapenaar, the co-chief investment officer at Anchor Capital, yesterday highlighted that Trump’s recent rhetoric marked a renewed focus on tariffs, suggesting he has “found a new toy.”
“In the last two weeks Mexico, Canada, China and now the BRICS nations have been threatened with tariffs. That’s on top of the threats to tariff everyone during his election campaign.
“The combination of policy by Tweet and erratic policy will do more to damage the confidence in the dollar than anything else. In the short term the cross hairs of tariffs are probably more on China than South Africa. Still, it’s not helpful.”
Before the announcement of the tariffs threats, South Africa’s economic indicators remained cautiously optimistic. Data revealed the country’s trade surplus widened to R14.6bn in October, up from a revised R12.6bn in September, buoyed by a rise in exports.
This was the widest trade surplus in three months as exports surged 5.3% over a month to a near one-year high of R179.6bn, mainly buoyed by shipments of precious metals and stones, chemical products, and machinery and electronics.
However, concerns linger over efficiency issues and the overarching global manufacturing slowdown that hampers demand.
Investec economist Lara Hodes echoed such sentiments, stating that despite a short-term surge in exports, “the global manufacturing environment in a number of advanced countries remains lacklustre”.
“Moreover, while there has been an improvement on the logistics front domestically, inefficiencies and deficient infrastructure continue to weigh on export potential,” Hodes said.
BUSINESS REPORT