Tariff Showdown 101

Tariff Showdown 101

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‍For years, the United States and China have danced a delicate, often combative waltz, each step shaped by changing administrations, shifting alliances, and clashing ambitions. But when it comes to tariffs, the friction is more than just political – it's a tangible threat to industries and workers across the globe.

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Nowhere is that disruption more raw and readily apparent than in the automotive world. The car sector is a truly global machine, built on intricate supply chains that crisscross oceans and borders, linking factories, suppliers, and workers from Detroit to Shenzhen. Whether a car rolls off the line in Ohio or Osaka, chances are it’s been touched by the ripple effects of US-China tensions. And as tariffs rise, so do costs, complexities, and uncertainties, sending shockwaves through an industry already navigating massive change.

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You've likely heard the saying: when two elephants fight, it’s the grass that suffers. While South Africa may not be at the centre of the tariff showdown, the fallout still lands hard, especially in the local automotive sector. When it comes to SA’s auto industry, it’s deeply integrated into the global market, with exports making up a significant chunk of production. Vehicles and components made here end up on showroom floors and in factories across Europe, Asia and even the United States and China. That’s why when global giants impose tariffs, shift sourcing strategies, or reroute supply chains, it doesn’t take long for the effects to hit home. And not just in theory; it lands hard on the ground at places like the Mercedes-Benz plant in East London, the Volkswagen hub in Gqeberha, and the Nissan, BMW, and Ford operations in Tshwane.

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With that said, we take a look at how the rising tariffs could affect the local automotive industry.

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What is happening, in a nutshell?

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Just recently, US President Donald Trump declared a national emergency and introduced a 10% baseline tariff on all imports, effective April 5, 2025, as part of a broader strategy to address the US trade deficit. The move is considered one of the most significant defensive actions in many decades.

• Additionally, Trump announced higher tariffs targeting approximately 60 countries and territories, set to begin on April 9. These tariffs were designed to counter perceived unfair trade practices and are applied on top of existing duties, resulting in an effective tariff rate of 54% on Chinese goods.​
• On the other hand, China, in retaliation, imposed 10–15% tariffs on US energy exports, including coal, liquefied natural gas, and crude oil, plus agricultural machinery and large vehicles.​ The nation also announced export controls on critical minerals such as tungsten and molybdenum, essential for various high-tech industries.
• Higher tariffs mean higher prices for imported vehicles. Take the Ford Ranger Wildtrak 4x4, for example. Locally, it sells for around R1,087,000. Now, if that same vehicle were imported into the U.S. under the new 25% tariff, it would cost approximately R1,356,188 — that’s a price hike of nearly R270,000. These tariffs are in place to protect US carmakers and jobs by making imported vehicles pricier.
• But protectionist behaviour doesn’t come without a price. While it might offer short-term relief for US manufacturers, it risks distorting global competition and shutting out high-quality, competitively priced vehicles from markets like SA. Over time, this could lead to fewer choices for consumers, trade retaliation from affected countries, and rising tension in global supply chains — all of which could hurt more than help.

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Why this matters for SA’s automotive industry

• Slowing global demand: South Africa is a huge exporter of a lot of cars and components to Europe and the United States, but with the rising global uncertainty right now, people in those countries might start buying fewer vehicles, which could hurt our local industry.
• Flood of cheap imports: With the U.S. putting heavy tariffs on Chinese vehicles, manufacturers from the East might start offloading their extra cars into African economies and other developing markets. That could flood the South African market with cheaper imports, making it harder for locally built cars to compete.
• Expensive components: South Africa, as it stands, relies on imported parts, many from Asia. But with the US now hitting Chinese suppliers with high tariffs, it could cause a ripple effect, making parts harder to get and driving up prices around the world.
• Shipping disruptions: As global trade routes shift to dodge tariffs, we might see rising shipping costs and longer vehicle import delivery times. That means more delays and higher costs for local car makers.
• Weaker rand: It often happens during global uncertainty that when the rand weakens, the import of parts becomes more expensive, which in turn pushes up production costs and makes it harder for cars to stay competitive.

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But it’s not all bad news

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With disruption comes opportunity. And SA has a few strategic cards it can play.

• As the US and EU try to move supply chains away from China, South Africa could position itself as a low-cost, politically stable manufacturing hub, especially under trade agreements like AGOA (US) and EPA (EU).

Electric Vehicle (EV) Pivot

• China leads in EVs and batteries. If Chinese EVs are blocked from Western markets, SA could look to partner with China for EV production locally, then export to Africa or the Middle East.
• Alternatively, SA could attract Western EV manufacturers looking for new manufacturing bases outside of China.
• There’s an opportunity to expand auto component exports to countries impacted by the trade war, especially if SA can offer lower-cost, tariff-free access via trade deals.

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What local manufacturers are saying

While the raised tariffs battle seems like a long-standing fight, the South African automotive industry must just make it a point to build more car parts locally. As it stands, many parts used in locally built cars come from other countries. That is risky business, given the additional costs associated with delays, especially if countries like China are slapped with tariffs.

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As South Africa slowly adopts EVs, it can be part of the solution. Currently, China is big on EVs, but the trade war could potentially block it from exporting cars to markets such as the US. Meanwhile, the United States has imposed a 100% tariff on Chinese EVs, which means the price of the car doubles when it enters the US market. This raises the question: why? The policy shift reflects the US government's strategy to bolster domestic EV production and reduce reliance on Chinese imports. In this case, SA can partner with car companies from across the continent to build EVs here and ship them to other countries. Another approach is to sell more to other African countries. Instead of relying too much on Europe or the US, South Africa can focus more on selling cars and parts within Africa through intra-African trade under the African Continental Free Trade Area (AfCFTA), which SA is also a member of, to buffer against external market shocks.

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The US-China tariff war in 2025 creates serious headwinds for SA’s automotive industry, especially in global demand and supply chain stability. But with quick adaptation—especially by leaning into local production, EVs, and regional trade – SA could turn global tension into a growth opportunity.

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In conversation with Thato Mntambo, General Manager of Corporate Affairs at Mercedes-Benz South Africa, it’s clear the company is closely monitoring the potential impact of the newly announced tariffs. “As a global company, we depend on constructive cooperation and policies that support mutually beneficial trade across international markets,” Mntambo shared in an email. She emphasised that Mercedes-Benz remains a strong advocate for free and fair trade as a foundation for prosperity, growth, and innovation. Looking ahead, Mntambo noted the importance of affected countries and the US engaging in constructive dialogue to find a sustainable path forward.

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On the other hand, Toyota South Africa, when contacted for comment, said that the tariff increments have no impact on its operations as it doesn’t export vehicles or parts to the US. The situation underscores how uniquely positioned each carmaker is when it comes to global trade. While Toyota SA remains unaffected, it puts a spotlight on how intertwined and sometimes isolated different markets can be.

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That said, SA may seem like a bystander in the trade war between the US and China, but a globalised industry suggests otherwise. The shift in demand, price hikes and supply chain issues further prove that what happens in Washington and Beijing doesn’t stay there. But even with all this uncertainty, SA has a real opportunity to build a stronger and more competitive automotive industry. This could mean making more car parts locally, working with other economies to build electric cars, and conducting more trade with other African nations through the AfCFTA agreement.

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