SA must forge bilateral trade deals with wide range of countries to ramp up exports in the Trump era

President Cyril Ramaphosa’s recent call with President Donald Trump about the peace process in Ukraine provides a crucial opening for South Africa to mend its frayed relations with the US.

The US has one of the largest economic footprints in South Africa. It is South Africa’s second-biggest trade partner in the world and one of its most critical investment partners.

There are more than 600 American firms operating in South Africa. Trade between the two countries totalled $20.5-billion in 2024, with South African exports consisting mostly of precious metals, motor vehicles and parts, iron and steel, and aluminium products.

As a trade-dependent economy, South Africa needs the US market, even as it charts a long-term diversification strategy. Steadfastly protecting this bilateral relationship is, therefore, in South Africa’s national interest.  

Although important, however, resetting the two-way relations will not insulate South Africa from the seismic shocks that have upended the global trade order since the onset of the second Trump presidency.     

South Africa must act swiftly to limit the damaging effects of the global trade war that has been unleashed by the Trump administration. Trump began his second term in office with far-reaching actions to alter US trade policy to attain a mixture of economic and political goals.

Encapsulated in what has been dubbed the America First trade policy, the actions include imposing reciprocal tariffs against foreign trade partners, addressing trade imbalances by tackling unfair tariff and non-tariff barriers enacted by other countries, as well as expanding domestic manufacturing to bolster national security.  

This confrontational approach to trade has seen the US levying a series of steep protective tariffs on almost all goods imported into the country. The escalation in these punitive trade measures culminated in Trump announcing – on 2 April, a day he called “Liberation Day” – a minimum 10% tariff on all American imports, as well as higher tariffs on imports from 57 countries. These reciprocal tariffs sparked retaliation from trade partners and caused a stock market collapse.   

The higher tariffs imposed on 57 countries were subsequently abruptly suspended for 90 days for all countries except China. The Trump administration’s accelerated trade war with China resulted in the hiking of baseline tariffs on Chinese imports to 145%.

For its part, China retaliated by levying a minimum 125% tariff on US goods, while also restricting exports of rare earth minerals vital to hi-tech industries.  

Trump’s antagonistic posture to trade, combined with the stalled multilateral trade negotiations that have cast doubts about the relevance of the World Trade Organization (WTO), calls on South Africa to drastically change its approach to foreign trade.

First, South Africa must reduce its reliance on American trade as a long-term strategy while safeguarding, in the short- to medium-term, market access. 

South Africa can no longer rely on the African Growth and Opportunity Act (Agoa) for its bilateral trade with the US. Agoa expires this year, and the Trump administration is unlikely to renew it.  If it does, it will be purely on transactional terms.

In any case, the US reciprocal tariffs imposed on African countries have neutered Agoa preferences. Agoa was introduced by former president Bill Clinton in 2000 to foster democracy and economic prosperity in Africa.

It allows African countries to export to the US market tariff-free. It is not a negotiated agreement. It is, to put it crudely, a freebie that the US government can take away if it so wishes.

South Africa has benefited immensely from Agoa which has enabled the country to export automobiles, platinum, nuts, wines, citrus and other goods to the US market duty-free. It has enormously bolstered South Africa’s trade with the US, making the country America’s biggest trading partner in Africa.

In place of Agoa, South Africa must proactively pitch to the US government a free trade agreement (FTA). Concluding an FTA with the US will enable the country to trade with the US on meritocratic terms, rather than relying on handouts.

Opting out of Agoa will create dislocations for South Africa exporters, who will require government support to adjust to the new trading conditions. South Africa traded robustly with the US before the advent of Agoa, and there is no reason it cannot do so without it.

It bears mentioning that South Africa initiated FTA talks with the US in the early 2000s, but got cold feet due to pressure from trade unions who feared that import-competing sectors would be wiped out.

Also, the country was wary of imposing its will on the smaller Southern African Customs Union countries (Sacu) – Botswana, Lesotho, Namibia and Swaziland – with which it shares a common external tariff. In terms of the Sacu Agreement, South Africa is required to obtain the acquiescence of these countries before entering into binding trade deals with third parties.

Second, and given the rapid and volatile geopolitical shifts currently under way, South Africa must design and implement an aggressive export market diversification strategy to capitalise on market opportunities in large and growing markets where it has insufficient or negligible economic presence.      

This means the South African government must shed its anti-FTA ideological antipathy and pursue FTAs with a diverse set of countries – developing and developed – to boost its exports.

Asia is a dynamic region mainly because of its proactive posture to concluding FTAs: the success of countries such as Singapore and the resurgence of Indonesia, Malaysia and Vietnam can be credited, in large part, to their bold and forward-looking FTA strategies. These countries’ policies are guided by pragmatism, not ideology.

Years of institutional paralysis within the WTO, the principal forum that sets the rules of international trade, have prompted numerous countries to doggedly promote bilateral FTAs or larger regional ones.  These countries include India, Indonesia, Malaysia, Thailand, Singapore, Korea, Turkey and Australia.

They have championed FTAs to reduce the risk of concentration on traditional markets and diversify export destinations for both goods and digital services. 

Moreover, within the WTO, various developing countries have been signing up to plurilateral agreements, such as investment facilitation for development, to attract foreign investment and grow their economies.

South Africa has frustratingly embraced a rigid ideological posture despite its low growth and weak investment performance. Ideological dogma has proven to be an albatross on South Africa’s growth and progress. This needs to change: South Africa must rapidly expand its global trade partnerships using FTAs and plurilateral deals to reinvigorate domestic economic growth.

The Trump administration’s trade war, which has diminished the US’s stature as the world’s most attractive trading power, has accelerated the trend towards FTAs.  

Countries have been seeking ways to diversify their economies away from the US whose erratic and unpredictable trade policies have roiled markets and triggered a loss of confidence in its ability to act as a reliable anchor of the global trade regime.  

The European Union (EU) has also been taking measures to reduce the reliance of its trade on the US. The regional bloc revealed recently that it had agreed to a request from the UAE to commence two-way trade talks as a result of US tariffs.

Yet for many years South Africa chose to ignore overtures to enter into bilateral trade and investment arrangements with the UAE. Moreover, the EU has expressed a desire to conclude a long-delayed trade deal with Mercosur, the South American trade bloc made up of Brazil, Argentina, Paraguay and Uruguay. This follows the signing last year of a trade agreement between Mercosur and Singapore.   

Furthermore, the EU and Australia have committed to restarting negotiations on a free trade pact that collapsed in 2023 over beef exports.  

Against this backdrop of a rapidly changing global trade landscape, South Africa cannot remain a bystander. It remains a mystery of South African trade policymaking that the country, whose external trade accounts for more than 60% of national economic output, has not been actively advocating FTAs. This is even more so given its consistently anaemic growth rates.

It has been many years since South Africa negotiated any major trade deals. The most consequential FTA concluded to date is the Trade, Development and Cooperation Agreement which South Africa signed with the EU in 1999.    

Another notable trade pact, which is now outdated, is the one the country forged with the European Free Trade Association, made up of Iceland, Liechtenstein, Norway and Switzerland. 

South Africa needs to break out of its anti-FTA ideological mould, a product of excessively protectionist instincts. It must forge bilateral trade deals with a wide range of countries to ramp up its exports. 

These countries include Mexico, Turkey, Indonesia, Saudi Arabia, Egypt, Algeria, Brazil, Singapore and the UAE. Additionally, South Africa must push for a rapid implementation of the African Continental Free Trade Area (AfCFTA), a watershed agreement that binds 54 countries and nearly 1.47 billion people into the world’s biggest single market.    

Speeding up the rollout of the AfCFTA has become even more urgent in light of the cancelling out by the Trump administration of the trade concessions enjoyed by African countries under Agoa.

The African continent represents one of South Africa’s significant export destinations. It is a captive and growing market for South African exports and the country must take advantage of the opportunities created by the AfCFTA to grow its African economic footprint even further.

The next chapter of South African trade policy must be dynamic, bold and pragmatic. It must aim to boost the country’s economic growth, attract much-needed investment and expand opportunities in the new areas of digital services and niche manufacturing. DM

Mills Soko is Professor of International Business and Strategy at Wits Business School.