Here be dragons: Charting new territory in the tariff and trade landscape

The US's recent "America First" protectionist stance has reverberated around the globe, prompting retaliatory tariffs from nations like China and Canada, while trade discussions are underway among 75 other countries. South Africa is feeling the pinch from the US tariff increases, facing the risk of being sidelined from the African Growth and Opportunity Act (AGOA). This raises important questions: What purpose do tariffs serve? What does the current landscape for the meat trade look like? And what opportunities and long-term consequences might arise from these policies?

Understanding international trade tariffs

Tariffs can vary based on the type of product, its origin, and the trading relationship between countries and are typically introduced for several reasons:

• Protecting domestic industries: Governments may impose tariffs, such as anti-dumping tariffs and most favoured nation (MFN) tariffs, to protect local businesses from foreign competition.

• Revenue generation: Serving as a source of government income.

• Trade negotiations: Used as a tool in negotiations or to retaliate against the trade policies of other nations.

In the South African context, anti-dumping tariffs on poultry products have been in place to safeguard local producers. However, South African importers are generally concerned about the application of MFN tariffs because they can lead to higher import costs, potentially impacting consumer prices and reducing import variety. Implementing MFN rates, especially when compared to preferential trade agreements like AGOA, can also result in a decline in South Africa’s welfare, particularly for agricultural exports.

Impact on South African meat exporters

South Africa is the largest producer and exporter of beef in Africa, at approximately 35,500 tonnes annually (figures end 2024). Key export markets for beef include China, Egypt, UAE, Jordan, Mozambique, Kuwait, Qatar, and Saudi Arabia.

According to the South African Pork Producers Organisation (SAPPO), in July 2024, South Africa exported 1266,74 tonnes of pork products, mainly to regional countries, with the top three being Mozambique, Namibia, and Lesotho. At the moment, South Africa does not export poultry and is a net importer.

However, the global meat market is highly competitive, and tariffs significantly shape export opportunities.

• African Growth Opportunity Act (AGOA): AGOA is not a trade agreement but a United States (US) law allowing duty-free access for qualifying goods imports from sub-Saharan African countries. Read the Wesgro Factsheet here. Currently, South Africa’s conclusion in AGOA is in jeopardy as a result of a number of political and diplomatic factors. The US market accounts for about 4% of South Africa’s agricultural exports, including mainly wine, citrus, grapes and nuts and the new baseline tariff of 10% will have a significant effect on local producers.

• High tariffs in key markets: While South Africa has preferential access to several markets, the landscape is shifting with the new US tariff policies. Tariffs in countries like China, Japan, and some Middle Eastern markets can also be as high as 20% to 30% on beef, diminishing South Africa’s competitiveness. High tariffs also affect the price competitiveness of South African meat compared to other global suppliers.

• Market diversification: High tariffs and trade barriers in key markets push South African exporters to diversify their markets. This diversification is essential to mitigate risks associated with tariffs and to tap into emerging markets with lower or no tariffs.

• Economic and supply chain effects: Tariffs on meat exports will raise costs for South African exporters, which will lead to price increases. These increased costs can disrupt supply chains and make South African meat less attractive to international buyers, reducing overall demand.

Other factors that impact export ability are disease outbreaks and control of especially foot and mouth disease.

Impact of tariffs on South African meat importers

South Africa relies heavily on meat imports to satisfy its domestic needs, particularly for poultry. Research expert Natalie Cowling notes that chicken is the most imported meat in the country. In 2022, imports of chicken meat reached nearly 291,000 metric tonnes, with meat meal and pork following at about 58,000 and 25.28 metric tonnes, respectively. Brazil remains the key import supplier of mechanically deboned meat (MDM), essential to the production of processed meat, an affordable protein source for lower-income groups. Additionally, approximately 24.31 thousand metric tonnes of pork were brought into the country from 2022 to 2023, mainly from Germany and Spain. (Source.)

International tariffs influence the meat import market in South Africa in several ways:

• Rising import costs: Tariffs on meat imports lead to higher prices for consumers and businesses. South Africa's reliance on imported meat means that tariffs on key imports, such as poultry from Brazil and the US, can make these products more expensive, contributing to inflationary pressures on the domestic market.

• Trade agreements and access to low-cost imports: Certain trade agreements allow for reduced or eliminated regional tariffs. However, tariffs imposed can create price volatility in South Africa’s import market. Emerging traders are especially concerned about the exclusion from AGOA, as they benefited from not paying the anti-dumping duty when imports remained within the quota. It is important to note that South African importers still need to pay the general MFN duty under AGOA (respectively 42% and 62%) .

• Consumer impact: Higher tariffs can increase imported meat products' prices, directly impacting South African consumers, especially in low-income households. This often leads to shifts in consumption patterns, as consumers may turn to cheaper domestic alternatives, putting pressure on the South African meat industry. Domestically, AMIE was one of the concerned stakeholders that petitioned for zero VAT chicken and offal products, specifically to alleviate the pressure on low-income households. With regards to imports, it is critical to note that South Africa does not have the production capacity to cater for the MDM and is solely reliant on imports for the manufacturing of processed meat alternatives.

• Retailers and processors: Meat processors and retailers in South Africa may face squeezed profit margins due to the increased cost of imported meats. This can impact the pricing strategies and the overall sustainability of businesses involved in the retail and processing sectors.

The US landscape

South Africa accounts for just 0.4% of US imports and 0.3% of its global exports. While this might seem small, the new tariff structure greatly impacts citrus, wine, and macadamia exporters. So, who are the biggest exporting countries to the US?

According to David Miller, consulting chief economist, Decision Innovation Solutions, Canada and Mexico have been the largest suppliers of imported beef to the US and accounted for 52% of the total imports. This is mainly because of proximity and road transportation to the US. Australia, New Zealand, and Nicaragua are also significant suppliers of beef to the US and combined, they account for 36% of the value of beef imports and 36% of the volume. The column below displays the period of 2019–2023. This was the reality at the end of 2024.

Strategic responses to tariff challenges

Both South African meat importers and exporters face challenges from international tariffs and other factors such as disease outbreaks and the impacts of climate change. However, strategies exist to mitigate these negative effects:

For exporters:

• Diversification: Expanding into new markets and building relationships with countries that offer favourable tariff structures is a key strategy for exporters to reduce their reliance on a few major markets.

• Value-added products: South African exporters can focus on value-added products such as processed meats, which may face lower tariffs in certain markets. This can help add value and offset the impact of tariffs on raw meat exports. Putting these value chains in place can stimulate job creation and economic development.

• Compliance and standards: Meeting international standards in terms of product quality and safety can enhance the competitiveness of South African meat in global markets, helping to mitigate the effect of tariffs. This also implies digitisation of processes and the upskilling of traders and producers.

For importers:

• Domestic production: Government incentives or subsidies can encourage local production, reduce reliance on imports, and provide price stability and a more robust industry.

• Alternative sourcing: Exploring other suppliers from countries with lower tariffs or more favourable trade agreements can help mitigate rising costs due to tariffs.

• Negotiation of trade deals: Negotiating with trading partners to reduce import tariffs can help make imported meat more affordable and competitive.

Long-term outlook

In the long term, global tariff policies will continue to influence South Africa’s meat industry. As global trade agreements evolve, the South African government will need to negotiate favourable tariff terms and pursue trade agreements that benefit both importers and exporters. Additionally, the rise of regional trade agreements within Africa, such as the African Continental Free Trade Area (AfCFTA), could reduce intra-African tariffs and provide a more favourable environment for trade within the continent.

Sipho Mhaga, customs and excise specialist at SNG Grant Thornton says in a recent article published in BizCommunity: “Despite the challenges, though, South Africa still has a unique opportunity to reposition itself as a leader in African trade and beyond. By embracing digital customs processes, strengthening regional trade networks and leveraging public-private partnerships alongside private sector investment, the country can create a more agile and resilient trade environment – one that evolves from merely reacting to global trade shifts to proactively leveraging the power of trade agreements to help shape its own economic destiny and that of the African continent.”

It is crucial for South African businesses to remain adaptable to changing tariff regimes and to continuously seek opportunities for growth, whether through exports or domestic production.

Conclusion

International trade tariffs profoundly impact South African meat importers and exporters, influencing pricing, market access, and competitiveness. While high tariffs can create significant challenges, they also present opportunities for strategic adaptation. By diversifying markets, adding value to products, and negotiating better trade terms, South African traders can navigate the complexities of global trade tariffs and remain competitive in both local and international markets. It remains important to note that imports and exports should always be balanced to ensure a robust industry, healthy competition and economic development.

Quoting the FAO: “Openness to food trade promotes higher availability, greater diversity and a more stable food supply throughout seasons. It can lower prices and improve access to food. Trade also affects the wider economy, spurring economic growth and accelerating the nutrition transition.”

The Association for Meat Importers and Exporters (AMIE) remains firm in its mission to promote global access, champion fair trade, and facilitate industry dialogue towards reaching this goal.