News of the South JOHANNESBURG – South African economist, Lumkile Mondli warned that the country South Africa could be among the countries who will suffer most thanks to the ongoing ‘trade war’ between the US and China.
Speaking to a South African Radio Station Mondli said, the country like other emerging economies, relies on a strong Chinese economy to stimulate its demand for raw materials.
“As South Africa deals with plenty of our own economic problems, factors beyond our control could lead to further hardship,” said Mondli.
his comes after announcements from Washington indicating that Trump’s administration will impose roughly R3 trillion in new tariffs on Chinese goods and 6,000 different items including rice and textiles will see their import taxes increased.
Trump warned that he would introduce even more tariffs if China chose to retaliate against his actions in any way.
This latest move appears to have scuppered chances of trade talks between the two countries, with a trade delegation China was planning to send to the US now unlikely to go through with it, according to South China Morning Post.
Mondli told added that job creation, self-reliance, and South Africa working with other African nations are the only ways forward.
“The lesson that we take from these trade wars is a [need to] focus on internal economic development where we mobilise funding for our infrastructure. As a country, we need to ensure that we are able to meet the demands of our people.
“There’s also much more focus in intra-Africa trade, particularly with the African continental fruit trade agreement that South Africa has signed,” he said.
Even before the trade war had escalated to its current level, Moneyweb reported that the trade war would have a significant impact on global growth, leading to implications for attempts to climb out of a technical recession.
A strong global growth environment would be supportive, but weakness in the global economy would make it even more difficult for the country to accelerate its fortunes.
South Africa is also highly dependent on foreign investment inflows. The global environment already shifted investor perceptions, with risk appetites diminishing significantly and emerging markets falling out of favour, before the trade war was in full swing.
All of this is bad news for a country that relies on portfolio inflows to balance its current account deficit. The rapid weakening of the rand since the middle of May, with it reaching R15 to the dollar (it is currently just under) is an indication of this.
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