Heavy blow — Trump tariffs to hit problem-riddled Eastern Cape hard

Following the announcement by the US President Donald Trump that export tariffs with a base rate of 30% will be imposed on South Africa, the Nelson Mandela Bay Business Chamber said it is extremely concerned about the impact this would have on the already fragile Eastern Cape economy. 

The local economy was highly reliant on the automotive industry and provided almost half of the country’s jobs in the sector, said chamber CEO Denise van Huyssteen.

“We are particularly concerned about the potential knock-on impact of reduced vehicle assembly volumes on the automotive components supply chain.”

It should be noted that some component manufacturers exported components directly to the US, said Van Huyssteen.

The United States is South Africa’s second-biggest trading partner.

The two biggest metros in the province, Nelson Mandela Bay and East London, both rely extensively on the automotive and component manufacturing industries.

“A number of countries will now have significant cost advantages over South Africa, including countries on this continent,” van Huyssteen said, explaining that this would affect where manufacturers chose to set up their factories. 

“We are deeply concerned about the impact the 25% tariffs, which the United States has imposed on foreign-made cars and parts, may have on our local automotive ecosystem. It is unclear at this stage how the 30% tariff base rate imposed on South Africa would relate to the generic 25% tariffs on foreign cars and parts. If it is more than 25%, we will be facing an even bigger cost disadvantage versus other countries.

“By far the biggest risk in the short-to-medium term is the competition that South Africa will face from non-US manufacturing countries, which may have a lower tariff base,” Van Huyssteen said.

“Our local manufacturing economy, which has been relatively agile and resilient in responding to energy, logistics and enabling environment challenges in the country, is struggling to be competitive versus other manufacturing operations around the world.

“Additionally, local vehicle assemblers are facing increased competition from cheap imports flooding the market, which in turn is reducing their local sales volumes. These factors, together with the potential of reduced export volumes to the US, make it even more difficult for the industry to be sustainable”.

South Africa exported 24,000 vehicles to the US in 2024. In 2023, automotive exports to the US were valued at R20.1-billion. Component exports were valued at R7.8-billion.

“These tariffs will be highly disruptive to the industry around the globe, especially since automotive manufacturing relies on long investment cycles and will not be able to quickly shift sourcing decisions to avoid the tariffs. This, in turn, could drive up costs for both consumers and automotive manufacturers,” Van Huyssteen said.

She emphasised that the industry was calling for a speedy and proactive strategic response to enable South African-based manufacturers to find alternative solutions.

“Government needs to move with absolute urgency to understand the full extent of the ramifications … on South Africa. Alongside this, work needs to begin among various stakeholders to unpack the specific impacts the tariffs will have, establish mitigation plans and quickly focus energies on areas of opportunity to reinvent and reposition our manufacturing and other affected sectors,” she said.

Hard hit