02 May 2025
News 24
by Sharon Modiba and Beth Dealtry
On March 26, 2025, the United States imposed a 25% tariff on South African automotive components and fully built vehicles — an abrupt policy shift that sent ripples through our local automotive value chain. Framed under Section 232 of the US Trade Expansion Act of 1962, these tariffs, ostensibly for “national security” purposes, threaten to destabilise a strategic pillar of South Africa’s manufacturing economy.
In particular, the automotive parts or components sector. It accounts for over two fifths of formal employment in the transport equipment sector and is confronted with precarious integration into global supply chains. The US administration recently amended its import tariff on vehicles and auto parts by introducing a temporary rebate scheme for American vehicle makers making use of imported components.
This allows rebates of 3.75% in the first year and 2.5% in the second. The “import adjustment” rebate acknowledges the impact of tariffs on US manufacturers dependent on global supply chains. But it provides minimal relief to exporting countries like South Africa, nor does it address the significant cost barriers faced by South African suppliers, threatening their continued access to the US market.
Bracing for impact
Following the imposition of the US tariffs, the International Trade Administration Commission (ITAC), with support from the National Association of Automotive Component and Allied Manufacturers (NAACAM), conducted a survey to understand the potential impact on automotive exports, inputs, production levels, employment, and market access of these tariffs on South African producers.
The survey revealed that the Eastern Cape, Gauteng, and KwaZulu-Natal, the country’s auto component manufacturing heartlands are bracing for impact. While some exporters are well-diversified, many others are deeply dependent on the US market. Transmission and tooling manufacturers for example, report that over 75% of their output is sold to American buyers. That leaves little room for manoeuvring when prices suddenly rise by a quarter overnight.
While the US has introduced a temporary offset mechanism allowing American assemblers to recoup a portion of their tariff burden, this relief does not extend to South African exporters. Any “trickle-down” benefits of the ‘import adjustment’ scheme, are likely to be marginal and short-lived.
South Africa’s automotive component sector has built its competitive edge on reliability, quality, and cost-efficiency. But the new Section 232 tariffs erode this advantage, and could widen the door for competitors based in countries with preferential or reduced tariff treatment, including US free trade partners like Mexico and Canada, as well as key automotive producers in select Asia countries such as South Korea and Japan. The risk is not only a loss of current markets but a permanent reconfiguration of supply chains that leaves South Africa on the outside, looking in. Yet all is not lost.
Cushion the blow
The ITAC-NAACAM survey also shows that many South African firms have identified alternative markets, including European, Asian and African alternative customers. If supported by smart trade policy and diplomacy, this geographic diversification could cushion the blow. In fact, some products, like catalytic converters and silencers, face limited global competition and present opportunities for expansion in non-US markets.
To pivot effectively, the sector needs support. Manufacturers are urging government action — through measures like a coordinated export promotion strategy within a functioning export council for auto components, improved production cost-effectiveness, and most importantly, a renewed focus on securing a relatively favourable bilateral trade agreement with the US. Ultimately, partnerships are viewed as increasingly critical in navigating a suddenly turbulent and uncertain global trade landscape.
Wake-up call
Trade diplomacy must now move to the frontlines of our industrial strategy. If the US tariffs are a reminder of the volatility of global trade, they are also a wake-up call. South Africa must future-proof its industries not just through policy; but through adaptability, resilience, and smart diplomacy. The road ahead will not be easy.
But with targeted support, diplomatic engagement, and a renewed focus on diversification, South Africa can ensure that its automotive sector doesn’t stall in the face of protectionism. Instead, it can accelerate toward a more resilient, inclusive, and globally competitive future.
The recent meetings between the presidents of the two countries, have opened the door for more detailed bilateral engagement. This will lay a foundation for continued collaboration, recalibrated trade relations and providing appropriate transitional support for the automotive industry in both nations. The feedback from President Ramaphosa’s recent visit to the White House reflects a positive start.