Disaster for South Africa worse than tariffs
Krutham executive chairman Stuart Theobald says that a global economic slowdown is likely to hit South Africa far harder than the direct impact of the United States’ 30% tariff on its exports.
Both disasters are attributed to the tariff and trade war being waged by US President Donald Trump since the start of the year, but it’s the global shock that may prove to be worse for South Africa than the direct hit itself.
While the country will definitely feel the short-term impact of a 30% tariff on its exports—which has been in effect since 7 August—the direct impact on the economy will be relatively small.
This is a view that has been echoed by many economists who have crunched the numbers.
Most estimates put the direct economic impact on South Africa at around a third of a percentage point to GDP, which is marginal compared to some of the other knocks the country has suffered—such as load shedding and collapsing freight and logistics networks.
Like many others, Theobald expects the short-term impact to be felt across affected industries, like the automotive and agricultural sectors.
While in no way downplaying the severity and harm done by the tariff hit, Theobald said there is “great uncertainty” around how permanent this will be.
With many moving parts, including government intervention, continued negotiation, pivots to other markets and unpredictable shifts in the United States itself, anything could happen.
The one aspect that can’t be ignored, however, is how the global economy is being and will continue to be hit.
Theobald noted that, in totality, Trump’s tariff war has increased the average US tariff rate to 18.3%, up from the 2.5% average that it was before.
“That will deal a major economic shock to the world,” he said, as tariffs suddenly jump to the highest level since 1934—the middle of the Great Depression.
This has restructured global trade almost in its entirety, and it won’t be without consequences.
Global growth is already slowing
The consequences are already being felt.
The International Monetary Fund’s July update to its World Economic Outlook report reflected a highly volatile period for global growth.
It represented a period of “breathing room” for world economies as they negotiated with the Trump administration over tariffs, and reflected a slight easing of the waves of panic that fed through markets in April.
According to the IMF, its forecast for global GDP output in 2025 lifted to around 3% in July, up from the 2.8% forecast back in April.
However, the international financier pointed out that these projections were still below the forecasts of 3.3% growth made at the end of 2024.
This reflects not only the reality of the uncertainties that persist in the market but also a fundamental downward shift in the reality of the tariffs in the market.
Following the July outlook, the Trump administration moved ahead with tariffs between 10% and upwards of 50% on many of the United States’ key trade partners, cementing the shift.
Theobald said that if global economic growth takes a serious hit as a result, “that would have second-order effects on South Africa’s economy as global demand slumps”.
“The size of that impact is difficult to anticipate, but it could be even bigger than the direct effect of the tariffs on South Africa’s output.”
For South Africa, GDP growth is, at best, expected to hit 1% in 2025, and more than likely to land around 0.7% or 0.8% due to the direct impact of the tariffs.
If the global economy slows down, this could sink even further. Warnings from economists in April, when the Trump tariffs were first announced, were that a global recession could do untold damage to the country.
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