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Blog : 10 November 2016 (SA trade with USA. Pre Donald Trump)
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After the shock result of Donald Trump winning the USA presidential elections we take a look at South Africa's trade pre-Donald Trump. As things might change drastically if he keeps true to his campaigning rhetoric that he has been blurting out in recent months. While South Africa forms part of African Growth and Opportunity Act (AGOA), the net benefit from trade with the USA does seem very small. AGOA is an act that allows sub-saharan countries to exports certain goods to the USA either duty free or with significantly reduced duties.
While AGOA has had limited success at least there is a net positive trade balance for South Africa with the USA, which is more than what South Africa's trade can say about China. |
South Africa vs United States of America
The graphic below shows the net cumulative trade with the USA from January 2010 to September 2016, per product grouping. It is clear from the graphic below that trade is clustered around Precios Metals, Iron and Steel and Machinery (See highlighted area).
The graphic above highlights the groupings in which both country's have the upper hand in. While South Africa has the net gain in Mineral Products, Precious Metals and Products of Iron and Steel, the United States has the upper hand in Chemicals, Plastics and Rubber and a significant advantage in Machinery. The rest of the groupings shows pretty similar values for both imports and exports between the two countries. The big question on everyone's mind is what is going to happen with trade relations between South Africa and the USA now that Donald Trump is the president. Well lets look at the historical trend in trade between South Africa and the USA. While the above graphic grouped trade over time into various product catergories, the graphic below will show value of imports and exports from and to the USA per year.
The graphic below shows that imports and exports from and to the USA are very similar. The net effect being a positive R26,5billion for South Africa. I.e. South Africa exported R25,6billion more to the USA than what they imported from the USA. But that is a very small amount (in terms of total trade and that is over a period of almost 7 years.
Question is will Donald Trump have an effect on trade policies and agreements such as AGOA? And will that have an impact on trade between the two countries. We doubt that Donald Trump would be able to affect significant changes to agreements such as AGOA. And even if there are ammendments auch as duties on current duty free items or increased duties, we do not see the USA suddenly stop importing precious metals and iron ore from South Africa due to import duties (or additional duties) being imposed on such products for example. Thus we do not forsee any significant changes in the trade relations between South Africa and the USA. And if there are changes to trade agreements and policies with South Africa we doubt the impact would lead to trade patterns that South Africa has with China for example.
China is the net benefactor in trade between South Africa and China, with South Africa running a net deficit in trade with China of R391,7billion from January 2010 to September 2016. No matter how bad Donald Trump is and how bad trade with the USA could possibly get under Donald Trump, it would in all likelyhood be a drop in the ocean compared to China.
While the South African government keeps building ties with China, the Chinese keep smiling away as South Africa will in all likelyhood never be the net benefactor of trade between these two countries. The graphic below shows the total imports and exports per year between China and South Africa.
China's one way traffic in trade with South Africa
As can be seen from the graphic below (in stark contrast to the one above), there is a clear difference in terms of what is being imported and exported from and to China, with South Africa importing goods far in excess of what they are exporting to China.
So while Donald Trump is all the rage at the moment and South Africans worry about the possible impact he will have on trade relations between South Africa and the USA, keep in mind that from January 2010 to Septemeber 2016, South Africa had a net surplus in trade with the USA of R26.5billion, while with their friends in the east, they have trade deficit over the same period of R391.7billion.
South Africans should be more worried about South Africas government's continued increasing ties with China as trade with them sees to be largely a one way street while with the USA at least it looks like the playing field is level. And even if Trump attempts to skew the playing field in favour of the USA, we do not see trade with the USA getting even close to the skewed levels seen with China. Instead of worrying about what you see, perhaps we should worry more about what we dont see in the news.
South Africans should be more worried about South Africas government's continued increasing ties with China as trade with them sees to be largely a one way street while with the USA at least it looks like the playing field is level. And even if Trump attempts to skew the playing field in favour of the USA, we do not see trade with the USA getting even close to the skewed levels seen with China. Instead of worrying about what you see, perhaps we should worry more about what we dont see in the news.