The loss of Agoa could reshape South Africa’s trade dynamics, leading to job losses, declining exports, weakened investor confidence, and shifting trade alliances.
With the new US trade tariffs that came into effect on 9 April 2025, South Africa was slapped with 31% on most products, and the free trade agreement via the African Growth and Opportunity Act (Agoa) seems an agreement of the past.
A general global tariff of 10% has been implemented on all imports to the US, with South Africa facing an elevated duty of 31% on its exports there. The automotive industry was allocated a 25% tariff on imported vehicles and car parts, directly affecting South Africa’s automotive exports.
The agricultural sector is also affected, especially the citrus industry, with a new 30% tariff.
During Donald Trump’s second term, diplomatic tensions pushed the agreement to a breaking point, and South African politicians have not adopted a conciliatory stance. Several US Congress members have submitted a proposal advocating Agoa’s termination, citing South Africa’s foreign policy conflicts with the US and allies.
In 2024, South Africa exported $14.7-billion worth of products to the US, approximately 13.3% of South Africa’s total global exports — but those South African exports into the US were only 0.44% of total US imports. These values indicate the importance of the US export market for South Africa and the relative insignificance of South African exports for the US.
Export growth and a trade surplus drive economic expansion, while a trade deficit signals economic leakage. Since 2000, Agoa has been central to US-Africa trade, offering eligible nations, including South Africa, duty-free access to the US market. However, shifting geopolitics and tensions threaten the agreement.
Losing Agoa benefits could have severe economic consequences, including job losses, trade disruptions, and slower growth. This article explores the risks to Agoa and its impact.
Exports and trade balance
South Africa and 35 African nations benefit from Agoa, which allows duty-free access to around 6,700 products. It now seems Agoa has expired. Over its duration, South Africa has been the top non-crude export beneficiary, with $55.9-billion in exports, followed by Nigeria ($11.2-billion), Kenya ($7.3-billion), Lesotho ($6.8-billion), and Madagascar ($3.6-billion) (USITC Dataweb, 2024).
Large consumer markets attract export-driven economies, making consumer spending a key indicator of market size. The US, the world’s largest consumer market, accounts for 26.4% of global consumer spending — twice that of the EU or China and more than all BRICS nations combined.
The US-to-South Africa consumer spending ratio is 58:1, underscoring the US’s importance as an export market. South Africa enjoys a trade surplus with the US, but faces a growing deficit with BRICS nations.
Between 2019 and 2023, South Africa’s trade surplus with the US increased by an average of 45% annually. Table 1 illustrates these trade relationships, contrasting South Africa’s positive balance with the US and its rising trade deficits with BRICS countries.
Graph 1 summarises SA-US trade since 2019, showing rising exports and declining imports, leading to a growing trade surplus. However, policy disagreements threaten this positive trend.
SA’s exports to the US (orange bars) have steadily increased from $7.8-billion in 2019 to $14.8-billion in 2024. A dotted trend line confirms this upward trajectory.
Imports (blue bars) fluctuate but remain lower than exports. The highest import value was $7.13-billion in 2023, while the lowest was $4.38-billion in 2020. Despite fluctuations, imports show a slight upward trend.
The trade balance (grey bars), calculated as exports minus imports, remains positive throughout, indicating South Africa’s trade surplus with the US. The surplus peaked at $10.3-billion in 2021 but declined slightly in later years.
This growing surplus highlights strong economic ties between the two nations. While exports show sustained growth, import variations may reflect shifting demand or policy changes.
The linear trend line suggests ongoing economic engagement, though future trade relations remain uncertain amid policy tensions.
Top growth sectors
Vehicles and accessories saw the highest growth at 43.6%, driven by strong US demand and government subsidies, supported by Agoa. Miscellaneous chemical products followed with 33.1%, reflecting increased exports of industrial and specialised chemicals. Aluminium exports grew by 13.4%, indicating rising demand in manufacturing and construction.
Other key sectors included precious metals and minerals (9.9%), machinery and parts (6.8%), and edible fruit and nuts (6.8%), showing steady expansion.
Declining sectors
Ores, slag, and ash recorded the steepest decline at -12.5%, possibly due to reduced demand, price fluctuations, or regulatory shifts. Iron and steel exports dropped by -8.2%, probably affected by tariffs or weakened industrial demand. Organic chemicals saw a slight -3.2% decline, indicating shifting trade patterns or competition.
Despite some contractions, South African exports to the US grew 8.5% overall. Strong performances in vehicles, chemicals, and metals highlight key industrial demand, while declines in ores and steel suggest areas needing adaptation to evolving global conditions.
Graph 2 compares South Africa’s export contributions to the US by sector in 2019 and 2023, highlighting shifts in trade composition.
Growing sectors
Precious metals and minerals remained the top export category, rising from 34.9% in 2019 to 36.3% in 2023. The most notable growth came from vehicles and accessories, which jumped from 7.1% to 14.5%, reflecting increasing US demand. Aluminium exports also grew slightly from 6.2% to 7.1%, indicating stable demand in manufacturing.
Declining sectors
Ores, slag, and ash saw the steepest drop, declining from 9.7% to 3.6%, suggesting reduced demand or lower volumes. Iron and steel exports fell from 7.7% to 4.97%, probably due to competition or lower industrial use. Organic chemicals declined from 4.1% to 2.6%, possibly reflecting changing US import preferences.
Stable sectors
Edible fruit and nuts remained steady, shifting slightly from 2.8% to 2.7%, while machinery and parts saw a minor drop from 6.5% to 6.2%.
The shift toward higher-value exports, particularly in vehicles and chemicals, suggests South Africa’s growing competitiveness in these industries, while traditional resource-based exports like ores and metals are declining. Precious metals remain dominant, reflecting continued demand for gold and platinum.
Implications of Agoa cancellation:
Economic consequences
With the US imposing higher tariffs on South African exports, key sectors like automotive, agriculture, and manufacturing will be affected. The loss of preferential access could lead to reduced competitiveness, billions in lost revenue, job cuts, and slower GDP growth.
A decline in exports would weaken the rand by 3-4%, raise inflation by 0.5%, and widen the trade deficit. GDP growth could slow by 0.4% to 0.5%, with 20,000 job losses, particularly in export-driven industries.
Impact on the automotive industry
The automotive sector would be among the hardest hit, as the US is a key market for vehicles from South African manufacturers like BMW, Mercedes Benz, Ford and Volkswagen.
In 2023, South Africa’s automotive exports hit $15-billion, making up 14.7% of total exports, with $1.6-billion in vehicle exports going to the US. Higher tariffs could reduce these exports by 20-30%, forcing multinational automakers to downsize or relocate production.
The sector employs 100,000 people directly and supports more than 400,000 jobs indirectly, putting the Eastern Cape, Gauteng, and KwaZulu-Natal at risk. A downturn would also affect suppliers, logistics, and retail.
Challenges in finding alternative markets
South Africa could try redirecting exports to the EU (Electronic Vehicle focused), China (low-cost vehicles), and the Middle East, but these markets are highly competitive and may not fully absorb lost US demand.
Broader economic risks
Beyond trade, Agoa uncertainty could deter foreign direct investment (FDI) and cause capital flight. Supply chains could shift to other Agoa beneficiaries, weakening South Africa’s industrial base. While BRICS and EU ties may strengthen, these markets cannot fully replace Agoa benefits. Diplomatic strain with the US could also limit future trade agreements and investment partnerships.
Mitigation strategies and conclusions
To reduce the economic fallout of an Agoa termination, South Africa needs to diversify export markets, strengthening trade with Asia, the EU, and African nations through the African Continental Free Trade Area (AfCFTA).
Also, enhancing competitiveness by improving productivity and lowering production costs can sustain global market access despite tariff barriers. Diplomatic efforts should focus on renegotiating preferential trade terms with the US while fostering growth in emerging sectors like electric vehicle (EV) production and green technologies.
The government should support affected industries through targeted incentives and subsidies, while using monetary policies to stabilise the rand and curb inflation.
Strengthening regional trade partnerships and maintaining proactive diplomatic dialogue will be essential for long-term economic resilience.
Rising US tariffs on South African vehicles threaten the automotive sector and broader economy, necessitating immediate policy intervention.
The loss of Agoa could reshape South Africa’s trade dynamics, leading to job losses, declining exports, weakened investor confidence, and shifting trade alliances. Political misalignment, trade imbalances, and policy uncertainties increase the risk of losing US market access.
South Africa must urgently reassess foreign policy, strengthen diplomatic ties with the US, and adopt trade-friendly policies to safeguard its economic future.
Proactive measures are essential to prevent a crisis that could hinder the country’s long-term growth and development. DM
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