US President Donald Trump’s 25% tariff on all automotive imports into the country will begin showing its impact on South Africa’s export-oriented auto industry by July when the orders it had already secured before the tariff imposition will have been fulfilled.
The 90-day pause on the separate 31% country-specific tariff imposed on South Africa based on the US trade deficit with it will also expire in July.
Industry professionals hope that, by then, South Africa will have secured a deal to stave off this 31% as well as the 25% blanket tariffs on all auto imports. However, “we should not negotiate with a begging bowl mentality”, insists Mikel Mabasa, CEO of the National Association of Automobile Manufacturers of South Africa (NAAMSA).
Stressing the need for a “shift from compliance to strategic alignment”, he told Peoples Dispatch that South Africa should position itself “as a key enabler of shared industrial development objectives on the African continent, rather than a passive beneficiary of US trade policy.”
Effective in 2001, the African Growth and Opportunity Act (AGOA), was passed by the US Congress to allow duty-free access to commodities produced in sub-Saharan Africa, and has shaped several sectors in the eligible countries – 32 as of 2024.
Attracted by this free access to US markets and the availability of cheap and skilled labor, many global automotive giants have set up their manufacturing plants in South Africa. These include German BMW, Mercedes-Benz, and Volkswagen, Japanese Isuzu, Nissan, and Toyota, and even the American Ford, although the latter has clarified that it does not export from South Africa to the US.
Last year, automobiles accounted for 64% of all South African exports under AGOA to the US. Of the half a million people employed in the industry across its value chains, about 40% or over 200,000 of them benefit from AGOA, including 86,000 employees in auto plants plus 125,000 related suppliers, subcontractors, etc, estimates Billy Tom, CEO of Isuzu Motors South Africa and the President of NAAMSA.
Overridden by the tariffs Trump has imposed by invoking emergency powers, the AGOA, which had been repeatedly extended since coming into force, has been practically nullified, even before it came up for renewal on expiring in September 2025.
Jobs under threat
This does not, however, mean that 40% of the industry’s jobs benefitting from it will necessarily be lost as a result, because the plants “manufacturing vehicles for the US market also produce vehicles for many other markets around the world,” clarifies Mabasa. “We currently export vehicles to 153 countries, including the US.”
The industry is heavily export-oriented, with 68% of its manufacturing outbound. The US is its third-largest and fastest-growing market. However, quantified in proportion, “only 6.5% of all our [auto] exports go to the US,” he added.
As a proportion of the total production of cars in South Africa, including those sold in the domestic and foreign markets, only “3.7% is going to North America [which is] very small,” said Duma Gqubule, economist and a research associate at the Social Policy Initiative. Nevertheless, the impact of loss on the US market is not negligible. He estimates that 5 to 10% of the total jobs in the industry are in jeopardy due to Trump’s auto tariffs.
If AGOA is not salvaged, “we could expect that the industry does not survive in South Africa,” according to Renai Moothilal, head of the National Association of Automotive Component and Allied Manufacturers (NAACAM). South Africa’s poorest province of Eastern Cape, where most of the US-bound vehicles and auto components are produced, will suffer the worst blow, he warned.
“South Africa’s continued eligibility in terms of AGOA is crucial since it does support the continued growth and development of the automotive industry in South Africa and Africa,” according to NAAMSA’s Automotive Trade Manual 2024.
“Even if AGOA is formally extended,” Mabasa explained, “its real economic value would be substantially diminished” if there is a continuation of the blanket 25% tariff on auto imports. Effective since April 2, this is not halted by the 90-day pause on the country specific tariffs. By early May, an extended list of auto-parts will also face this tariff rate.
Under such a hollowed-out AGOA, South Africa will only be able to export “primary products rather than the intended value-added goods. This undermines AGOA’s original goal of supporting industrial development on the African continent.”
By jeopardizing the South African auto industry, Trump is not providing any meaningful protection to the US auto industry. “South Africa’s exports of automobiles account for only 0.99% of US total automobile imports and 0.27% of auto parts and thus do not constitute a threat to US industry,” said Parks Tau, the Minister of Trade, Industry, and Competition.
“We should be retaliating”
His statement further pointed out that auto trade between the two countries is not one-way, benefiting South Africa at the cost of the US, contrary to Trump’s depiction. The US imported just over two billion USD worth of automobiles and automotive parts from South Africa last year. But it also exported over USD 1.1 billion worth.
“While South Africa’s exports to the United States go duty-free under AGOA; US imports into South Africa also enjoy rebates under the Automotive Production Development Program,” he added.
In fact, when trade in automotive parts is considered separately, Moothilal pointed out that imports from the US, valued at R16 billion last year, are almost 3.5 times higher than the exports to the US, valued at R4.6 billion.
NAAMSA also highlighted the “substantial two-way automotive trade” in its 2024 Trade Manual. “South African automotive exports to the US increased by 497.4% between 2001 and 2023, while automotive imports from the US increased by 1,083.2%, proportionally much more than exports [growth] over the same period,” it stated.
This accords to South Africa an opportunity to impose retaliatory tariffs on the US imports into the country. South Africa can also retaliate by selectively withholding its exports of critical minerals to the US. 25% of all US imports of nine critical minerals come from South Africa.
“We should be retaliating and see what happens,” Gqubule told Peoples Dispatch. However, he regrets, “Our government is really scared of upsetting the US.”
US increasingly hostile to South Africa
South Africa’s relationship with the US has been under strain ever since it took Israel to the International Court of Justice (ICJ) in December 2023 over the genocide in Gaza that the US is funding and arming.
“South African Government has a history of siding with malign actors, including Hamas, a US designated Foreign Terrorist Organization and a proxy of the Iranian regime, and continues to pursue closer ties with the People’s Republic of China (‘PRC’) and the Russian Federation,” complained the US-South Africa Bilateral Relations Review Act, introduced in the US House of Representatives last February.
Describing its legal action Israel’s genocide as an “aggressive” position toward the US, Trump, soon after taking office early this year for his second presidential term, halted all aid and assistance in February, complaining about the Expropriation Act 13 of 2024.
This act was a “symbolic gesture” toward correcting the failure of post-Apartheid land reforms, which has left 72% of all of South Africa’s farmlands in the ownership of the European colonial settlers who make up just over 7% of the population.
Trump deemed this a “racially discriminatory property confiscation” against South African Whites, whose farms’ viability he went on to threaten by imposing a 31% tariff on South Africa, before pausing it for 90 days, during which a flat 10% will apply.
In the course of the negotiations for a trade deal, the Trump administration is likely to try to arm-twist South Africa into abandoning this expropriation act and its case against Israel. Nevertheless, South African labor – the frontline victims of Trump’s trade war – is in no mood for a trade-off on these two matters.
While stressing the importance of South Africa’s trade relations with the US and the need to negotiate an agreement, its largest trade union, the National Union of Metalworkers of South Africa (NUMSA) maintains that “there is nothing to review about such a correct position.”
Its National Bargaining Conference Declaration on March 26 framed “the land question which is the plight of the majority of South Africans who are Black and African” and “an end to the genocide that is killing women and children in Gaza and West Bank” as non-negotiables.
When the South African ambassador Ebrahim Rasool was expelled last month by the Trump administration, cheering crowds thronged outside the Cape Town International Airport to welcome him on his return.
Among the crowd were the leaders and cadres of the ruling African National Congress (ANC), the South African Communist Party (SACP), and the country’s largest federation of trade unions, the Congress of South African Trade Unions (COSATU). This reception is yet another indication that the popular mood in the country is against making compromises with the US.
Read: “I will wear my persona non grata as a badge of dignity”, said South African ambassador expelled by the US.
On the other hand, within the US, there is a campaign against the former deputy finance minister Mcebisi Jonas, appointed as special envoy to the US on April 14 to negotiate a trade deal after Rasool’s expulsion.
The media has been raking up the observations he had made in 2020 about the racist and homophobic character of Trump, whom he had described as “a narcissistic right-winger [who] took charge of the world’s greatest economic and military powerhouse”.
Diversification and production for domestic market is an urgent imperative
Under these circumstances, unless Trump makes a volte-face on his tariff regime – a possibility that cannot be discounted – the prospect of restoration of former trade relations under which South Africa had free access to the US market cannot be relied upon.
“We should be diversifying as a matter of urgency,” stressed Gqubule. “We have seen that China’s President Xi Jinping, immediately after Trump imposed these tariffs, went to his Southeast Asian neighbors to look for alternative markets and trade agreements. We should be doing the same with our neighbors in Africa and BRICS.”
The progress made in this direction is not enough, says Gqubule. Although the African Free Trade Agreement was ratified in 2018, the intra-continental trade volume is “very low”, even though South Africa “exports quite a lot within our continent.” On the question of advancing intra-BRICS trade, “it has been very quiet”, he complained.
Another crucial, and often overseen, scope for expansion of South African manufacturers’ consumer base is the domestic market. Suppressed by neoliberal austerity, affordability in the South African market is low. Most South Africans cannot afford the cars produced in South Africa under the Western and Japanese brands.
Most cars bought within the country are cheap, produced in China and India, which “have done very well in terms of providing more affordable cars,” he explained. To expand its reach within the South African market, its manufacturers need to start building cheaper cars.
