How US Tariffs Could Affect South Africa’s Economy

(The Post News)- South Africa might see the repercussions of these international tensions as the US trade war with China intensifies and tariffs rise. The country’s economic picture has become more uncertain due to factors like pressure on exports and rising consumer costs. President Donald Trump’s recent tariff announcements, especially those targeting China, have already significantly weakened the South African rand. The nation’s business environment, particularly in industries like agricultural and automotive, may see major challenges as it prepares for the possible termination of its preferential trade access to the US.

Over thirty percent of South Africa’s GDP comes from exports, of which about nine percent come from the US. Accordingly, any hiccup in US-South commerce could result in a 2.7% decline in South Africa’s economic activity. Given the nation’s already high unemployment rate, which is still around 30% and the potential disproportionate effect on the youth employment sector, this decrease is especially worrisome.

The suspension of the African Growth and Opportunity Act (AGOA) represents a significant threat to South Africa. This agreement provides South African goods with preferential access to the US market; in its absence, South African exporters may encounter increased tariffs or trade barriers. Industries like agriculture, which rely significantly on export markets, may face substantial economic repercussions.

Although the scenario is concerning, South Africa’s natural resource endowments might provide some protection, according to Osagyefo Mazwai, an investment strategist with Investec Wealth & Investment International. He contends that South Africa’s competitive advantages, especially in the mining industry, may lessen the impact of tariffs. The nation has substantial quantities of vital minerals, including gold, manganese, and platinum, which are essential for US and international industry.

Tariffs may lower South Africa’s export competitiveness, but they might not result in a complete collapse of commerce, according to Mazwai. He notes that it is challenging to completely cut off economic connections because nations like the US are very dependent on South Africa for these essential minerals. As demonstrated by Chinese commodities that have entered the US market through Mexico, South African exports may still be able to reach the US through other routes even if tariffs are imposed.

The larger global commerce environment presents a greater difficulty. Due in part to Trump’s tariffs, the rand has already displayed signs of fragility, shedding more than 6% of its value in relation to the US dollar in just one week. The exchange rate hit R19.40 against the US dollar as of April 2025, raising worries about inflation and possible increases in fuel prices. Decreased investment and slower economic growth may result from these challenges as well as decreased profit margins for South African exporters.

Despite these obstacles, some of the risks may be reduced by South Africa’s calculated response. For example, in order to stay competitive in the face of tariffs, exporters may try to lower prices, even though this could hurt profits and have an effect on employment. Additionally, South Africa has been looking into new markets, especially in the Middle East and Asia, where economic ties are expanding.

Mazwai remains upbeat about South Africa’s ability to bounce back, though. He thinks that notwithstanding tariffs, South Africa’s position as a vital supplier of minerals will continue to be valued due to the global trend toward trade based on comparative and competitive advantages. Although South Africa faces difficulties due to the possibility of US tariffs and the suspension of AGOA, its special status as a supplier of vital resources may help protect it from the worst effects. Although the path ahead may be difficult, South Africa may be able to weather the storm if it navigates carefully and concentrates on its competitive advantages.