Although President Donald Trump has paused the implementation of the 10 per cent hefty import tariff towards dozen countries for 90 days, a local economist says this is not a sigh of relief as anything can still happen.
Economist Thembinkosi Dube referred to the similar situation of the US Agency for International Development (USAID) where the American president paused the aid for 90 days, however, later on implemented the complete halt of the aid in several countries.
“I do not think anything can stop him from finally implementing the tariffs, so it is a wait and see situation and it is almost certain that he might stick to his decision,” he said.
Dube stated that Trump had created a resilient mode for countries, as they were now creating other ways on how they can trade.
Last week, Trump imposed a 10 per cent tariff on imports from Eswatini
Furthermore, goods from approximately 60 trade partners deemed ‘worst offenders’ by the White House, including the European Union and China, faced significantly higher rates.
Trump framed these increased tariffs as retaliation for perceived unfair trade policies.
The announcement sent shockwaves through the global economy, with analysts predicting higher prices for American consumers and a slowdown in US economic growth.
This dramatic shift in US trade policy raised questions about the future of existing trade relationships, including that of Eswatini.
Currently, Eswatini’s primary exports to the US include raw sugar E464.7 million, other processed fruits and nuts E33.6 million, and knit T-shirts E23.3 million.
Over the past five years, Eswatini’s exports to the US had demonstrated a steady growth trajectory, increasing at an annualised rate of 4.76 per cent, from E252.6 million in 2018 to E582.1 million in 2023.
However, the newly-imposed US tariffs, particularly the baseline 10 per cent tariff, could potentially impact the country’s export competitiveness.
While the specific rates applied to Eswatini, they were not explicitly detailed in the initial announcement, the general shift towards protectionism signalled a potential challenge for the country’s exporters.
Dube also highlighted the performance of the lilangeni amid ongoing global trade tensions, noting a drastic decline against the USD.
“As of yesterday, the exchange rate was over E19,” he said.
He warned that if the global trade wars continued, the situation could worsen for the Lilangeni.
“We have observed that the lilangeni is weakening; yesterday it closed at E19.5 to the USD and E25 to the pound sterling, which is unprecedented,” he said.
Dube explained that the currency’s value was heavily influenced by demand.
With the tariffs affecting South African commodities, demand has declined, further impacting the lilangeni’s value.
“If tensions between the two countries persist, we might find ourselves in a situation where the lilangeni weakens further, potentially beyond E20. If the situation continues, I believe that by next week we could be above E20,” he added.
The implications of this currency depreciation could lead to increased costs for commodities exported to these countries.
Priced
On the import side, items priced in US dollars, such as electronics, may become more expensive.
Fuel prices could also rise, particularly since some imports come from South Africa.
Dube cautioned that if brent crude prices could rise again next week, the ministry of natural resources might announce an increase in fuel prices, which would contribute to inflation.
Dube stated that these trade wars could not continue indefinitely.
“At some point, it will hit a peak and bring about a lasting solution.
What is happening is that President Trump is pushing his own agenda while also solidifying the need for BRICS, where countries could potentially move away from the dollar. Once that happens, it could be irreversible,” he warned.
