Amid all the uncertainty with Donald Trump’s return as the US President, the implications of his proposed trade policies have stirred concerns within the agriculture sector.
The Agricultural Business Chamber of South Africa (Agbiz) yesterday warned that the suggested imposition of tariffs could leave a significant impact on the global agricultural landscape, especially if retaliatory measures were enacted by China.
Wandile Sihlobo, chief economist at Agbiz, said Trump’s threat that the US may impose up to 20% tariff on all imports and 60% on goods from China should not be taken lightly.
Sihlobo said such measures could rekindle a trade war reminiscent of 2018, when retaliatory tariffs led to adverse consequences for US farmers.
“We don’t know how China would react to such tariffs. However, if China retaliates as it did the last time, the US soybean and maize farmers and pork producers would again be negatively affected. We could see this through disruptions in global grains and oilseed prices,” Sihlobo said.
“The US is a significant producer, and when its grain market activity is disrupted, the impact tends to be felt globally. Moreover, US farmers could also start exploring other export markets they have not been as present to hedge against China’s risks.”
The stakes are high, given that the US stands as a vital player in global food production. Any turmoil in its agricultural markets can reverberate through the global economy.
The 2018 tariff impositions by Trump resulted in China redirecting its agricultural orders to Brazil and Argentina, significantly impacting US suppliers.
Today, China holds the title of the leading agricultural importer, accounting for over 11% of global agricultural imports, with US exports trailing closely behind Brazil.
With an annual expenditure of just over $200 billion on agricultural imports, China remains a cornerstone of the global agricultural trade system.
Despite the doom and gloom surrounding potential US tariffs, Sihlobo remained optimistic for South Africa, noting that the direct risks to local farmers were minimal at this stage.
However, he acknowledged the importance of monitoring US trade developments closely, as a surge in competition from US products in South African traditional markets could lead to price pressures.
Agbiz noted that amidst these uncertainties, South African farmers must remain vigilant and responsive to shifting global dynamics. The ongoing fragmentation of global trade fosters the need for South Africa to diversify its export markets significantly.
“South African farmers must closely follow the formal trade policy developments in the US beyond President Trump’s campaign promises.
“If he follows through with the promises of high import tariffs on China, and China retaliates, then there will be volatility in the global oilseeds and grain prices. US farmers will likely feel more pressure than other regions. The South American farmers stand to benefit as an alternative source for China to procure soybeans.”
Sihlobo said in a fragmented world like today, an export-oriented sector should spend more time and resources on broadening export markets and diversifying the risk.
“Whether the US imposes any other import tariffs that could directly affect the South African farming community remains to be seen. At the moment, we are inclined to believe the risks may still be minimal,” Sihlobo said.
“South Africa’s agriculture growth hinges on the country’s success in creating as many export markets as possible. In addition to retaining the existing export markets, BRICS remain one such avenue.”
BUSINESS REPORT
