South Africa: Opportunity or Risk in US-China Trade War?

The following commentary on the US-China trade war appeared on March 13, 2025 in Die Burger (The Citizen) and Beeld, two South African national newspapers, owned by News24.com - See the English version below.

Bied die Handelsoorlog tussen die VSA en China Geleenthede vir Suid-Afrika?

The Donald Trump presidency took off like a bull in a china shop (pun intended), and he’s been rearranging shelves ever since.

Trump’s “America First” quest has seen several changes implemented in the past weeks that foretells of a shift in the global economic landscape. Not least of these changes has been Trump doubling down on trade tariffs against China, which he initiated in 2018 during his first term as president. By 2020 the US measures affected approximately 66% of Chinese exports, while China’s retaliatory efforts affected 60% of US exports. The trade war is the predominant global issue, affecting global market stability, consumer prices, and stockmarket struggles, superseding the war in the Ukraine, and potential conflicts in the South-China Sea.

The motivation of these measures by the US has everything to do with China’s rapid rise as a global superpower over the past decades, which is seen as a direct threat. Make no mistake however, with or without American action, China's meteoric economic rise has already upended the global economic apple cart, and has been reshaping trade and power dynamics. The behemoth Chinese manufacturing base has become a global leader, at the expense of the US, and has emerged as an increasingly key technology and automotive player. According to Dutch CPB (CPB Netherlands Bureau for Economic Policy Analysis), China’s export volume grew by 12% in 2024 Year on Year, far outpacing global trade, which grew at 3%.

Apart from trying to curb China’s economic influence, Trump’s tariffs, his preferred economic weapon, is also aimed at bringing manufacturing jobs back to the US, and ensuring national security. The security threat is a bipartisan concern in Washington, given recent examples of China’s cyber-intrusions in US affairs. In December, 2024 Chinese hackers was able to access US Treasury data, overriding the cybersecurity services to access workstations and government documents. In another high-profile example in January this year, the Chinese app TikTok was briefly banned in the US by unanimous vote, also due to data safety concerns.

Trump’s Tariff Escalation and China’s Response:

Only weeks into his second term, the Trump administration slapped a sweeping 10% tariff on all imports from China and Hong Kong. On February 22, Trump signed an “America First Investment Policy” memorandum that orders the US to block any Chinese-affiliated investments in American “technology, critical infrastructure, healthcare, agriculture, energy, raw materials or other strategic sectors”. On Friday, he threatened to impose additional 10% tariffs on China, aimed at slowing China down and reducing the US trade deficit. In a clear escalation of the trade war, tensions are deepening. As anticipated, China retaliated with targeted tariffs on American goods.

Surprisingly, the Middle Kingdom has thus far not retaliated with the same level of intensity. Experts believe it might be that seven years of US tariffs and export restrictions “have left the CCP with fewer levers to pull”. However, based on findings by the Brookings Institution, Chinese tariffs are strategically targeted to affect the US industrial heartland, and many of the counties that voted for Trump will be disproportionately hard hit. In line with the country’s long-term approach, China has been preparing well for the second Trump presidency.

In addition, in response to these US measures, the CCP (Chinese Communist Party government) has been reinforcing its long-term strategy of diversifying trade away from the US and deepening economic ties with alternative partners. How South Africa positions itself in this shifting global economy, is crucial for our long-term economic well-being.

The Opportunity for South Africa:

Unable to look to the US anymore, China needs to find alternative sources of raw and agricultural products to keep its behemoth manufacturing industry running and feed its population, the 2nd largest on earth. As trade with the US has decreased, the country has sought deeper economic ties with ASEAN, the EU, and Africa. In 2023, China accounted for 11% of all global agricultural imports, worth US$200 billion, more than any other country.

Here lies the opportunity for South Africa. South African farmers could expand their footprint in the Chinese market, with trade in agricultural products like citrus, wine, and nuts already partially increasing. Wandile Sihlobo, chief economist at the Agricultural Business Chamber of SA, has called on the government of national unity (GNU) to make increased exports to China and the Middle East a priority.

After the Forum on China-Africa Co-operation (Focac) trade talks in September 2024 in Beijing, Louw van Reenen, executive chairperson of the privately-owned Beefmaster Group, was quoted as saying that “the deepening relationship with China could unlock an additional 50% more beef exports within the next year.”

In 2020-21 South African wine imports to China soared by approximately 50% after China added a 212% tariff on Australian wine imports, due to “political differences”. There have been calls to ensure a larger, lasting wine footprint, and to take advantage of the gaps that have opened up in the Chinese consumer market.

Since 2017, South African exports to China have risen from R1.4 billion before the trade war to nearly R3 billion in 2018, after US tariffs were implemented. While agricultural exports to China have steadily grown, there is competition from fellow BRICS members. Thus, clearly there is some conflicting interest here. However, South Africa should prioritize its own economic interests, much like the two global superpowers do.

Cape Town Harbor

Platforms of Growth:

BRICS - South Africa’s membership in BRICS (Brazil, Russia, India, China, and South Africa) has proven to be a powerful economic pact against Western trade uncertainty. Formed in 2006, with South Africa joining in 2010, its purpose is to foster co-operation in areas of trade, finance, energy, and infrastructure development.

BRICS countries account for a significant share of global GDP. The recent BRICS summit in Brazil underscored the bloc’s value for growing inter-member trade, as an alternative to the historic reliance on the West. Brazilian Foreign Minister Mauro Vieira emphasised the bloc’s growing influence, saying BRICS “is more relevant than ever.”

Mitigating US trade aggression, China has been actively redirecting supply chains towards BRICS members to circumvent the US. This can be South Africa’s gain, if we leverage our membership to attract more investment and increased trade. These member markets represent approximately 40% of the global population.

Treading carefully though, as association with China and Russia will put South Africa at odds with the US. Trump has threatened last week to smack a 100% tariff on all goods from BRICS member countries as their inter-co-operation grows.

The Belt and Road Initiative (BRI) - China’s (BRI) is a massively ambitious, global infrastructure and trade development strategy, launched in 2013 by President Xi Jinping. It’s a key long-term strategic initiative aimed at connecting China with parts of Europe, Asia, and Africa through the development of infrastructure and forging economic co-operation. As the leading African economy, South Africa is a key partner in this initiative.

During the past decade, according to the World Economic Forum, China has become Africa’s primary creditor, and largest trade partner. Despite the feared negatives of China’s incursion efforts into Africa in the past decade, increased infrastructure investment could supercharge South African logistics, energy, and industrial sectors, making us a crucial gateway for continental trade. China has invested significant resources into engaging South Africa. In September 2024, a delegation of South African officials, led by President Cyril Ramaphosa, attended the 2024 Focac meetings in Beijing for talks on closer economic co-operation.

However, this partnership representing China’s ambitions and South Africa’s needs require careful negotiation to ensure that investments align with our own long-term development goals. Unlike other African case studies, it does not have to lead to unsustainable debt burdens.

Playing a Strategic Game:

There’s a Kenyan saying "When elephants fight, the grass gets trampled, but when they dance, the grass can grow." The US-China trade war is creating new opportunities for smaller trade partners like South Africa to benefit economically and strategically. It’s a moment of risk and opportunity.

Import-export data shows that South Africa is already benefitting. The platforms are available and the relationships have been established. Leveraging our BRICS membership and strategically engaging with China’s Belt and Road Initiative, South Africa should actively position our industries to take advantage of the shifting trade dynamics. Agreements signed with China and other BRICS partners should provide long-term benefits rather than short-term gains, thus carving out a stronger market position over time.

South Africa First:

This will likely put South Africa at odds with the US, but it should also be noted that China’s goals are not our goals. One would hope our decision-makers would follow a “South Africa First”-policy. It will require a fine balancing act negotiating a narrow middle path. In this, our leaders should look to the examples of India and Vietnam. These countries, who have been courted by both the US and China in recent years, have put the interests of their own countries first, instead of exclusively following either superpower due to a specific ideological preference.

At the same time, as the global economy becomes more fragmented, South Africa should not solely depend on BRICS or China, but be open and flexible to new trade partners. Sensible diversification is key to building new, and strengthening existing economic relations as a global player.

I hope our policymakers and business leaders will rise to the occasion, amidst the looming tariffs threat. (As this article was being written, Trump announced stiff new tariffs to be imposed on China, Mexico, and Canada.) South African decision-makers should be wary of getting sucked into the politics of the US-China trade war. Cautious practicality, with an economic focus, should supersede political ideology.

As a proud South African, and for the well-being of my fellow countrymen and women, I pray that our leaders tread carefully and do not let slip this opportunity.