n a surprise deal struck in Scotland, the United States and European Union have agreed to a 15% tariff on key European exports and a $750-billion EU commitment to buy American energy. Political economist Prof. Patrick Bond weighs in on the economic and geopolitical impact of the agreement.

Newzroom Afrika: The United States and the European Union have agreed on a trade deal that will see EU exports taxed at 15%. The deal was reached during talks between US President Donald Trump and European Commission President Ursula von der Leyen at Trump’s Gulf Resort in Scotland.

Trump said, “Excuse me, a baseline tariff of 15% will apply across the board, including for Europe’s crucial automobile sector, pharmaceutical, and semiconductors.” As part of the deal, the 27-nation EU bloc has agreed to purchase $750 billion worth of energy from the US, as well as an additional 600 billion rand in investments.

So, what can we learn from this in terms of the situation in South Africa? Let’s bring in Professor Patrick Bond. He’s a political economist at the University of Johannesburg.

Prof, it’s always good to talk to you. Thanks very much for coming on. I mean, we’re sort of bracing ourselves for that 30% tariff hike, right? We’ve already seen the massive impacts the tariffs from earlier this year have had in South Africa on the automotive industry.

Patrick: Yes. Nice to be with you, Michelle, and your viewers. It’s an 87% crash in the supply of cars from South Africa to the United States over the second quarter, year on year. That’s amazing because it suggests that the 25% that was put on cars, the 50% on steel and aluminium—those are really changing the way South Africa has to trade, as we expected.

But August 1 comes up on Friday, and what can we learn from last weekend—this very, very unfortunate deal that the EU cut? And although the Germans are supportive, you can really feel the tensions because the French—and even, you know, the quiet, let’s say non-reliable Emmanuel Macron, the French President—compared to also his main ministers, the Prime Minister, the Trade Minister, they’ve been really critical.

I’ll just quote Donald Trump. According to Laurent Saint-Martin, who’s the Trade Minister, “Donald Trump only understands force. It would have been better to respond by showing our capacity to retaliate earlier, and the deal probably could have looked different.” I think that’s actually the right way to see it.

And I hope people in Parks Tau’s iffice, our Trade Minister, are also understanding that you actually can’t just lie down, hope that Donald Trump accepts a game of golf, and that you’re going to, you know, buy some oil and gas from the US and all will be fine again.

Newzroom Afrika: Yeah, I perhaps think it’s a losing game to try to anticipate anything—any way—that Donald Trump might act. But in terms of the basics of the EU deal, Prof, how does it compare, would you say, to the initial goals of the EU?

Patrick: Well, the initial goals were to keep the tariff at 4.9%. So, about tripling of this tariff is the outcome. And the reason is that Donald Trump has a theory, and he has some economists—I happen to have gone to undergrad with one of them, Kevin Hassett, Council of Economic Advisers. And those guys think that, number one, if they’ve got a lot of money flowing in from these higher tariffs, that will offset the government debt that they’re running up by giving corporates the continuing huge tax cuts—and rich people as well.

And that the decline of the dollar will also increase US competitiveness, and that inflation won’t really be a problem. And they’re very worried, in fact, that if it does rise, then the Federal Reserve Chair—his name is Jerome Powell—and he’s about to be fired by Trump, that he would have to put up interest rates to fight inflation, to try to bring it down.

Those are the ramifications that we’ll only see play out over the next few weeks, but especially from August 1, when the 30% tariff hits South Africa and all the other countries that have not made deals—just six out of about 190 countries, some penguins on an island as well. The six that have done the deals have got the sort of 15%. We’ve had this baseline of 10%, but now we’re looking at 30%, and there’s not going to be much hope for changing that baseline of 30%.

We do have platinum and gold—two main exports to the US—at 0%. Those are part of the general minerals imports that the big companies in the US have insisted to Trump that he not actually raise tariffs. For macadamia nuts, for citrus, for grapes and wine—those will be very hard-hitting, with tens of thousands of jobs at stake.

As for the aluminium and steel—well, they use a lot of our electricity, don’t they? So, we’ll have to see if they are cut and if we can move the electricity to ordinary people and labor-intensive industry and small businesses. Maybe actually that wouldn’t be a bad thing.

Newzroom Afrika: Yeah. So obviously, as you say, Prof, we’re worried. The Finance Minister has already said that we’ll lose 100,000 more jobs as a result of these tariffs. That’s probably lowballing the number. But critical minerals, as you’ve just mentioned—might that be something that puts us in a better position if we put it on the table? I mean, we don’t have the likes of what the EU has agreed to here—purchasing $750 billion of energy from the US and 600 billion in investments. I know we don’t have that investor.

Patrick: We’ve actually had a number of South African companies go to the US and invest—and not do very well. But we are buying oil and gas—that’s increased dramatically. It is the number one purchase now. As we’re all—you know—South Africa is actually buying cars from the US and selling cars. It’s a very, very uneven situation—very fluid.

I think the other aspect—you know—when you hear the Reserve Bank and the Finance Ministry say we’ll lose jobs in industry: there are not that many jobs in these big smelters. 1,200 jobs at Richard’s Bay for the big aluminium smelter—South32, it’s BHP Billiton’s smelter—and they use 6% of the electricity grid, and they get that at 30 cents a kilowatt-hour, which is 1/8 of what we pay.

Now, if that electricity was given—especially in these circumstances where we periodically have shortages—was given cheaper to labor-intensive industry, I don’t think we’d necessarily lose the jobs. But the problem is: could we use the steel and aluminium internally for infrastructure, for housing, all the things that we’d need it for—instead of losing that US export market—build up domestically?

And there we’d need more state spending. And of course, you know, Minister Godongwana doesn’t want to do that. He’s under the IMF austerity regime. And so we’ve seen cuts in state infrastructure and in state housing. So that would have to be, you know, built up from a different philosophy of governing—one that really did serve popular interests.

Newzroom Afrika: Yeah. So, the French PM said this is a dark day for Europe. And I suppose, given what you’ve told us about 15% being triple what the EU wanted in terms of a trade deal, that’s probably right. The PM saying it signals a submission to US demands. Do you think, Prof, that this deal with the EU puts the US in an even stronger position in terms of global trade dynamics?

Patrick: Well, yes and no—because of course, who’s going to be paying the 15%? Certainly, there’s a lowering of demand, so therefore there will be, you know, less output from Europe into the US market. But the US consumer also pays, and that price inflation may, uh, lead to interest rate increases and a recession. So then we’d all be paying, wouldn’t we?

And I think the main question is not just Europe—the dark day—but also just before that: Japan, and before that, the Philippines, and Indonesia, and Vietnam, and a sort of strange deal with China with very high tariffs, but it ended that escalation that you kept seeing. Now, those are six countries that have just done the deal with Trump. Why didn’t they act collectively with that huge power of potential?

Well, I have to blame President Ramaphosa. He’s the head of the G20. Really, he should have, earlier on, announced an international trade emergency meeting. And then we should have fought back collectively. There’s still time to do that before November, when the G20 is held here. And maybe voting Donald Trump off that island—and putting the G19 next year somewhere else—would be the right punishment for this extremely destructive behavior. You add it to climate and public health and the Gaza genocide and all the wars that Trump’s in. There’s a real reason that the US should be subject not just to more trade tariffs, but maybe trade sanctions.

Newzroom Afrika: Wow. It seems like such an obvious thing to do, doesn’t it, Prof—to call that kind of emergency summit? Why not act together?

Patrick: Well, yeah. I mean, the power relations are adverse. We have in Parks Tau a very compliant neoliberal—very pro-market. He’s even promoting coal sales from South Africa to Israel that fuel the genocide. He’s replied in Parliament saying, “No, we don’t want to disturb the World Trade Organization.”

I think ideology—and that balance of forces in which our government still looks primarily to the West, more of a subimperial power—than it does to other potential relationships, with maybe even neoliberal European governments and certainly other BRICS governments. And if they’d worked together, they could have done much better than this divide-and-conquer that Donald Trump’s achieved so far.

Newzroom Afrika: Yeah, and he truly has achieved that, hasn’t he? So what happens from now until Friday, Prof—do you reckon—behind the scenes?

Patrick: Well, my guess is there’s, again, a bit of frantic activity. We don’t have an ambassador in the US because Ebrahim Rasool was kicked out by Marco Rubio, the US Foreign Minister. We don’t have a special envoy because Mcebisi Jonas can’t get the visa to even go to the US—because in both cases they said, I think correctly, that Donald Trump has a racist set of policies and practices.

So I think South Africa is going to be, you know, at the very bottom of the priority list for doing these deals and getting any kind of deal. And so we’ll be hit with a very high tariff and demand—like we saw with the 87% crash of automobile sales in the second quarter, year-on-year. That will also affect macadamia nuts, citrus, the vineyards. And you know, we’re going to have some problems starting on Friday.

And I think Ramaphosa is aware, and he said pretty openly, well—it’s time to diversify the markets. And see, the follow-on is that China’s dumping low, below-cost-of-production goods—dumping in South Africa: steel and tires, all sorts of things. And so we’re having tariffs now against our friend in the BRICS, China.

And this is the situation we’re probably seeing all over the world—a race to the bottom, overcapacity being displaced into places like South Africa, which we don’t have the defense mechanisms we need. We’ve lost clothing, textiles, appliances, electronics, footwear—where all sorts of our industries that used to employ lots of workers have been smashed by international trade.

And I think, you know, maybe the term delinking—to try to rebuild locally and reflate the economy from below in the most unequal society in the world—would be worth talking about. We just don’t have the balance of forces yet where the left can rise up and demand that.

Newzroom Afrika: And obviously that’s a long-term project you’re talking about, Prof. And the people today won’t be benefiting anytime soon.

Professor Patrick Bond, let me thank you for your time this afternoon—political economist at the University of Johannesburg. And as you say, Prof, it’s not just our unemployment rate in South Africa, but also consumers in the US that will be impacted by US President Donald Trump’s decisions.

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