In the mounting trade war between global giants, some of the most severe damage could be suffered by a smaller bystander that has been caught in the crossfire: South Africa.
As many as 7,500 jobs in South Africa are threatened by U.S. President Donald Trump’s announcement of steel and aluminum tariffs, according to South African estimates. And while countries such as Canada have won temporary exemptions from the tariffs, South Africa lost its bid for an exemption this week.
The tariffs are a heavy blow for South Africa, which is already struggling with high unemployment, slow economic growth and widespread poverty.
“South Africa finds itself as collateral damage in the trade war of key global economies,” said Sidwell Medupe, spokesman for the country’s Department of Trade and Industry. “South Africa is concerned by the unfairness of the measures.”
Mr. Trump announced levies of 25 per cent on steel imports and 10 per cent on aluminum in early March. He has granted temporary exemptions to several U.S. allies, including Canada. But when South Africa pleaded for its own exemption, in a series of written submissions and telephone calls to U.S. officials over the past several weeks, its request was denied.
South Africa had offered to limit its U.S. steel and aluminum exports to a fixed quota, based on the amount of its 2017 exports, but the offer was rejected.
South Africa argues that it, too, has been a victim of the glut of cheap global steel that has helped to trigger the trade war. Chinese steel imports have flooded into South Africa in recent years, damaging its steel industry and causing job losses. But the argument failed to sway the U.S. administration.
“Due to these measures, South Africa will be disproportionately affected, both in terms of jobs and productive capacity … in a sector already suffering from global steel over-capacity,” Mr. Medupe said in a statement this week.
The government is also worried about the preferential treatment that other U.S. trading partners have received. This will damage the competitiveness of South African steel and aluminum and “is likely to displace South African products out of the U.S. market in favour of the exempted countries,” Mr. Medupe said.
After announcing the tariffs, the Trump administration gave temporary or indefinite exemptions to a range of countries: not just Canada and Mexico, but also Argentina, Australia, Brazil, South Korea and the European Union. In total, a majority of U.S. imports of steel and aluminum are currently exempted from the tariffs.
South Africa provides a relatively small proportion of U.S. imports, which makes it more puzzling that the United States refused to give it the same exemption that it gave to bigger suppliers.
Only about 1 per cent of U.S. steel imports and 1.6 per cent of U.S. aluminum imports are from South Africa. This, according to Mr. Medupe’s statement, shows that the South African steel and aluminum exports are not a “threat to national security” – the official U.S. reason for the tariffs.
South Africa alleges that the U.S. duties are a violation of World Trade Organization principles. But it hasn’t given up hope on the issue. Its trade department is asking South African exporters to talk to their U.S. buyers to consider applying for product exemptions, under a U.S. commerce department process.
South Africa and a number of other African countries have received trade preferences from the United States in several industries, especially textiles and apparel, under the African Growth and Opportunity Act, which was approved by the U.S. Congress nearly two decades ago. There have been fears that Mr. Trump will seek to renegotiate the deal.