SA must prepare for an uncertain and unpredictable global trading environment

South Africa finds itself in the middle of US President Donald Trump’s latest and increasingly antagonistic foreign trade policy.

Since taking office, Trump has used the threat of a 25% import tariff to pressure Canada and Mexico into implementing stricter border security measures and addressing fentanyl trafficking and to persuade Colombia to allow US military flights carrying deported migrants to land.

US President Donald Trump signs executive orders in the Oval Office of the White House in Washington, DC on 30 January 2025. (Photo: EPA-EFE / Bonnie Cash)

China is once again a key target of tariffs, with an additional 10% tariff imposed on Chinese imports into the US and a move to eliminate the de minimis provision, which allows packages under $800 to be processed without customs duties — an exemption widely used by e-commerce platforms such as Shein and Temu.

Trump has now imposed a 25% import tax on all steel and aluminium imports into the US, with the prospect of additional tariffs on pharmaceuticals, computer chips and automobiles.

Moreover, he has threatened to impose “reciprocal tariffs” on importers.

While it is not clear precisely what this implies, his statements indicate that these could be tariff levels similar to those imposed by foreign countries on US exports. For emerging economies like South Africa, where tariff rates are relatively high, this would result in substantial increases in tariffs across a wide range of products.

These moves are an escalation of the trade policy measures imposed by the Trump administration during his first term when he raised tariffs from 2018 on imports from China and on imports of aluminium (10%) and steel (25%).

These tariffs had a significant negative impact on South African exports, with the volume of US imports of aluminium products from South Africa falling by 57% and of iron and steel falling by 27% between 2017 and 2019 (see diagram below). The value and volume of US imports of these products from South Africa have still not reached prior levels.

Own calculations using US imports for consumption purposes obtained from the USITC DataWeb.

The increasingly isolationist stance of the Trump administration poses several threats to South Africa. Higher barriers to access the US market could result in significant diversion of exports by all countries away from the US market to other markets.

In addition to being constrained in its exports to the US, South African exporters would now have to contend with increased competition in third markets such as the European Union (EU), currently a significant export destination for South Africa.

Domestic firms in South Africa would also face increased competition as foreign firms divert their exports to the South African market. Further, if President Trump’s tariffs spark a trade war, where affected countries reciprocate by raising their tariffs on US exports as has already been done by China, global economic growth could suffer, further depressing demand for South African exports.

In addition to these general threats, Trump’s second term has yielded specific measures against South Africa. Trump officially cut aid flows to South Africa via executive order on Friday, 7 February 2025, citing various issues such as the recent signing by President Cyril Ramaphosa of the Expropriation Act and South Africa’s International Court of Justice case against Israel.

Additionally, the recently confirmed US Secretary of State, Marco Rubio, has threatened to “boycott” the G20 summit, which is being held in South Africa later this year. This may not be the end of Trump’s targeting of South Africa, as he has threatened additional import tariffs and other restrictive trade measures.

Agoa

Importantly, the African Growth and Opportunity Act (Agoa) is once again up for renewal, with the programme set to expire in September this year. Based on Trump’s previous comments, there is a risk he will withdraw US support for Agoa.

This will have significant implications for South Africa and other African countries. Agoa provides South African firms with duty-free access to the US market for selected products, which boosts their competitiveness relative to exporters in other non-beneficiary countries.

South Africa currently exports around $3-billion worth of goods to the US under Agoa preferences (see diagram below). This equates to just over 20% of all South Africa’s exports to the US.

The bulk of South African exports to the US are, therefore, not directly vulnerable to the loss of preferential access under Agoa. The effects will also be concentrated among a few products.

Vehicles represent by far the largest share (49.73%) of all South African exports to the US under Agoa preferences. Other sectors that benefit from Agoa are edible fruits and nuts, particularly citrus products; beverages, spirits and vinegar, particularly wine; and a few articles of apparel and clothing.

Should Agoa not be renewed, these products will be the hardest hit, although even in these cases, the losses may be small as the preference margins are generally below 4%.

A greater risk to South Africa is the threat by Trump to impose reciprocal tariffs on US imports. South Africa’s main exports to the US under Agoa are passenger motor vehicles with a cylinder capacity exceeding 1,500cm³ but not over 3,000cm³.

These exports from South Africa benefit from a 2.5% preference into the US market relative to other competitors without preferential market access. South Africa, however, imposes tariffs of between 20% to 25% on US exports of these products.

The imposition of reciprocal tariffs could, therefore, boost US tariffs on South African exports of these motor vehicles by up to 25%.

More broadly, using South African export data for 2022 and 2023, the imposition of reciprocal tariffs would see the general US tariff on South African goods rise from below 1.5% to 5.5%. 

Own calculations using US imports for consumption purposes obtained from the USITC DataWeb. GSP denotes Generalised System of Preferences. MFN denotes the Most Favoured Nation tariff.

 However, it is not all doom and gloom. Should preferential access under Agoa be renewed, South African firms could potentially benefit from import tariffs that specifically target other countries or regions, such as China and the EU.

Rising tariffs will increase the preference margin that South African firms enjoy when exporting to the US market. This could lead to increases in market share for South African exporters as US importers avoid the tariffs by switching to South African sources.

South Africa must embrace a forward-looking trade strategy to ensure its economy remains resilient in an era of increased protectionism and uncertainty from the US. This includes decisive action to diversify its export markets through trade agreements to reduce its reliance on the US market.

In this regard, the African Continental Free Trade Area (AfCFTA) provides a unique opportunity to strengthen trade linkages in the continent – sub-Saharan Africa is already the dominant market for South Africa’s non-mineral exports.

However, exports to Africa continue to be constrained by high tariffs and non-tariff barriers, high logistics costs, poor infrastructure and inefficiencies at the border.

Exports of services, including digital services, require the conclusion of a services trade agreement with the rest of the continent and with existing free trade area partners such as the EU.

The AfCFTA Protocols on Trade in Services and Digital Trade, and the annexes on trade facilitation, non-tariff measures and border cooperation provide the instruments through which to achieve these outcomes in the case of Africa.

Trump’s tariffs may be framed as a domestic policy move, but their consequences will be felt across the globe.

It is imperative that South Africa prepare itself for an uncertain global trading environment over the next few years. DM

Jing Chien is a lecturer, Policy Research in International Services and Manufacturing at the School of Economics, University of Cape Town.

Prof Lawrence Edwards is director of Policy Research in International Services and Manufacturing, School of Economics, UCT.