South Africa needs to urgently build a trade bazooka — or water gun — as it deals with Trump 2.0. Negotiating empty-handed will not help, especially when facing rampant extortionists such as the US president and his ilk.
The government needs to work from the worst-case scenario as it tackles the crisis in its relations with the US. The worst case includes tariffs on our exports and sanctions on several political lazeaders.
We can learn from the hostility of the US towards the EU and countries such as Mexico and Canada — and how they are managing their relations with America.
An example of the nature of the Trump administration is the deal between the US and Ukraine. This could give the US revenue from Ukraine’s minerals and other natural resources, and is one of Trump’s demands, according to the New York Times.
The creation of a US-controlled fund that would receive revenue from Ukraine’s natural resources is one of the possibilities contained in a draft agreement, according to the newspaper.
Missing from the draft was Trump’s initial demand that Ukraine contribute $500bn (R9.30-trillion) to the fund and pay back twice the amount of any future American aid.
Under the draft agreement, Ukraine would contribute half of its revenue from the future monetisation of natural resources — including critical minerals, oil and gas — as well as earnings from associated infrastructure such as liquefied natural gas terminals and port infrastructure.
This fund would not draw on revenue from existing mines, oil wells and other natural resource businesses. The US would own the maximum financial interest in the fund allowed under American law, though not necessarily all of it. It is unclear how that would be interpreted.
Trump could not have been more extortionist if he tried. There is nothing South Africa can legitimately bargain with in negotiations with people like that.
South Africa is not an innocent bystander or victim. We have been poking the bear for several years, alienating the US through actions at home and on the global stage
This week, the US leader threatened to hit the EU with 25% tariffs, and we can assume South Africa can expect something similar.
The absence of US political representation — and that of several of its allies — at the Group of 20 gatherings in South Africa is one of the signs of more drama looming.
We should not be fooled by the EU’s newfound love for South Africa, and its recent overtures. The EU is in the crosshairs and looking for strategic allies. South Africa needs to play the game with open eyes.
Cancelling USAID funding for HIV/Aids programmes is part of the plan to browbeat nations into submission.
South Africa is not an innocent bystander or victim. We have been poking the bear for several years, alienating the US through actions at home and on the global stage.
The EU can rely on its “trade bazooka” — a trade instrument built during the Trump presidency that provides for retaliation to trade tariffs or restrictions on foreign investment.
The anti-coercion instrument (ACI) allows the EU to revoke the protection of intellectual property rights or their commercial exploitation — such as software downloads and streaming services — which could upset Silicon Valley companies.
But neither South Africa nor the EU can afford a trade war because their economies are struggling. It is easy to negotiate when you have cards to play, as shown by Canada and Mexico in announcing retaliatory measures just hours after the US decision to levy tariffs of up to 25% on goods from those countries. They have since reached separate deals with the Trump administration, which announced the tariffs would kick in early in March.
Europe will dump us the moment it manages a good deal for itself, so it’s not enough to rely on strategic allies.
President Cyril Ramaphosa announced in his state of the nation address that envoys would be sent around the world — and ultimately to the US. Almost a month later, we don’t have the names of the envoys, nor have they booked their first flight. What is he waiting for?
A trade bazooka would not necessarily help South Africa, but would be part of the reckoning with the reality of a lost relationship with the US.
Maybe our participation in Africa Growth and Opportunity Act arrangements will be terminated later this year. We have to accept this as a possibility.
One of those making that argument is Donald MacKay, CEO of Johannesburg-based research house XA Global Trade Advisors. He says: “The decision our politicians need to make is if we are better off waiting for the axe to fall, or whether we should choose the time and terms of our exit.”
• Mkokeli is lead partner at public affairs consultancy Mkokeli Advisory
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