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Africa|Export|Manufacturing|Water|Manufacturing
Africa|Export|Manufacturing|Water|Manufacturing
africa|export|manufacturing|water|manufacturing-industry-term

AGRT or AGTR?

14th March 2025

By: Riaan de Lange

     

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Is it America’s Great Reciprocal Tariff or America’s Great Tariff Reset? Any thoughts? As to whether this will Make America Great Again (MAGA), I leave that for another day. Other than AGRT or AGTR, what are your thoughts on calling it America’s Great Tariff Equalisation?

Whatever it is called, it has relegated or elevated – your choice – the World Trade Organisation (WTO) to ‘dead man walking’ status. But then, it is apparent that the WTO feared a second Donald Trump Presidency. Consider the instalment of this column which appeared in the December 13, 2024, edition – yes, it was a Friday, which is not a good omen for some. The piece was titled ‘WTO DG reappointed’ and cited an article from the Chartered Institute of Export and International Trade, which stated that “several WTO members back move to expedite the process to give Ngozi Okonjo-Iweala a second term as director-general”. The article read in part: “Bloomberg reporting suggests that the call for an early election could be part of a ploy to hedge against the impact of a potential second Trump Presidency.” It concluded by stating that “Donald Trump’s [previous] Presidency ushered in a protectionist era of US trade policy . . . but it also led to a period of disengagement with the WTO.”

The WTO has, at best, been the Bretton Woods stepchild; let’s not contemplate the worst for the moment. It has primarily been the perpetual underachiever compared with its more successful siblings: the International Monetary Fund and the International Bank for Reconstruction and Development, better known as the World Bank.

Those who have been writing the obituary of tariffs should be reminded of the quote attributed to Mark Twain: “The reports of my death are greatly exaggerated”. Yet, quite ironically, the organisation famed for tariffs’ supposed demise might well become tariffs’ most extraordinary victim. It will, of course, depend on the extent to which tariffs are used for ‘transactional’ purposes rather than as a countermeasure.

In last week’s column, ‘No way out’, I mentioned that the proposed application of ‘reciprocal tariffs’ is founded on Trump’s premise: “It’s called you screw us, and we screw you. Very simple.” This is politely referenced as “tit-for-tat tariffs”.

The obvious questions are: Where does this leave South Africa? How does the US view South Africa? Will it treat it individually or react to it as part of a collective BRICS alongside Brazil, Russia, India and China? One thing is for sure – there are no ‘tit tariffs’ that South Africa could use to retaliate should it be the target of ‘tat tariffs’.

With the WTO seemingly relegated to the sidelines, South Africa might well ponder the decimation of its manufacturing industries in what can only be considered an effort to appease the WTO. However, the WTO is not solely to blame for the self-harm inflicted by the South African government’s Holier than GATT approach. The ‘logic’ of the day was that South Africa’s manufacturers were largely uncompetitive behind high tariff ‘walls’ and that the only way to remedy this situation was to reduce tariffs to lower levels than what South Africa had committed to the WTO. As a consequence, South African tariffs became waterlogged, in that ‘water in the tariff’ was created – the difference between the bound rates and the applied rates.

So, South Africa allowed imports to flood its markets while its own exports do not receive similar favourable treatment in foreign markets.

In essence, the US has had enough of trade deficits, which is the reason behind ‘reciprocal tariffs’. So, through the imposition of tariffs, the US will be faced with the challenge of whether the imports can be manufactured in the US or whether they will impact their consumers’ surplus.

This raises the question of whether South Africa has had enough of trade deficits. Before you provide an answer to this question, the country would be recording monthly trade deficits if it were not for its faithful fellow Southern African Customs Union member States. Resolving the deficits is, of course, another matter, for an increase in tariffs would merely contribute to reducing its consumers’ surplus, and it is highly doubtful that this would attract manufacturing investment.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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