[Opinion] The ongoing tariff dance

South African companies exporting to the US face a 30% reciprocal tariff from 1 August, although last week Mr Trump indicated the deadline was “not 100% firm”.

In addition to the 30% reciprocal tariff, South Africa also faces a 10% tariff for aligning with “the anti-American policies of BRICS”. While Mr Trump did not single out South Africa for this BRICS tariff, he said there would be “no exceptions to this policy”.

Among a fairly disparate and ineffectual group, the 10% tariff threat against BRICS, the 30% tariff against South Africa, the 50% on Brazil, and an effective trade Cold War between the US and China may well all combine to provide the BRICS members with an ever-useful uniting tool in politics and foreign policy: a sense of injustice, and a common enemy.

An emerging trend in Mr Trump’s reciprocal tariff targets is that they are aimed at placing pressure on China. Of the fourteen letters Mr Trump initially sent to US trading partners on 7 July, ten went to Asian countries. All the letters contained a warning regarding trans-shipped goods, i.e. goods that are shipped through one country to avoid higher tariffs elsewhere. In this context, it would include Chinese exports that are diverted elsewhere to avoid US tariffs imposed on China.

Significant emerging trend

A second significant emerging trend in US trade policy is that non-trade matters are not off-limits for targeting. Mr Trump threatened Brazil with a 50% tariff from 1 August in a letter to President Luiz Inácio Lula da Silva, citing the judicial treatment of former Brazilian President Jair Bolsonaro: “This Trial should not be taking place. It is a Witch Hunt that should end IMMEDIATELY!” Mr Bolsonaro faces charges for an alleged coup attempt. Notably, the US runs a good trade surplus with Brazil.

This illustrates that any matter that attracts Mr Trump’s attention may form part of combined trade, investment, and diplomatic actions towards other countries. This widening of the scope of trade policy will make it more difficult for countries such as South Africa to avoid high reciprocal tariffs by focusing exclusively on trade and investment matters.

While he is likely to continue leaning into the threat of higher reciprocal tariffs, the effectiveness of the threat is chipped away every time said tariffs are promised and then delayed (or abandoned).

Even traditional US allies may be more wary, and less willing to concede to US demands, if there is  persistent uncertainty as to whether Mr Trump and administration will stick with the given deal.

Unintended consequences

An unintended consequence could be that countries prefer trade agreements, investments, and diplomatic forums where the US is at least partly sidelined or avoided. A country that styles itself as reliable and predictable in trade and other matters – read: China – could try to fill some of the gaps being created as a result of US trade policy.

As an example of new, different trade engagements – and incentivising regions and countries to bring more shared pressure on Washington – the tariff uncertainties reverberating outward from Washington are pushing the European Union to coordinate more closely with countries such as Canada and Japan. The latter was one of the first governments out of the blocks after Mr Trump’s inauguration, engaging at various levels and seeking to secure as low a new tariff regime as possible with the US. Mr Trump spoke of the “fantastic relationship” between the US and Japan.

Last week, after 101 days of negotiating, Japanese Prime Minister Shigeru Ishiba (the first Asian leader to visit Mr Trump after his inauguration) was also the first foreign leader to receive a tariff letter from the American president.

Tariffs will very likely continue to be an important tool in Mr Trump’s toolkit for reshaping US trade relationships, and geopolitics more broadly. Given the widening of the trade-negotiation scope to include even countries’ domestic judicial matters, governments seeking to ink new trade deals with the US will need to be prepared for Mr Trump to ramp up or add to tariffs at any time.

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