R72 billion axe hanging over South Africa’s neck
If US president-elect Donald Trump’s tariffs pledge comes to fruition, it could add to the challenges faced by South Africa’s major employers, such as manufacturing, motoring, and agriculture.
South Africa’s economy faces another daunting challenge as Allianz Trade, a trade credit insurance arm of German insurer Allianz, warns of the potential fallout from Donald Trump’s anticipated return to the US presidency.
The company estimates that South Africa’s exports to the US could shrink by as much as $4 billion (R72 billion) during 2025 and 2026 if Trump enacts sweeping tariffs as pledged.
This scenario would disproportionately impact industries already under strain, particularly car manufacturing, mining, and agriculture.
In a report assessing the global trade implications of a second Trump presidency, Allianz Trade foresees a “challenging period” for South Africa’s export landscape.
The company anticipates the imposition of a 5% tariff increase on imports into the US, excluding key trading partners like China, Canada, and Mexico.
For South Africa, this could lead to retaliatory trade measures and considerable export losses.
Certain exports, like precious metals and chemicals, may be less affected due to their critical importance to US industries.
Platinum, which accounted for $5 billion (R90 billion) of South Africa’s exports to the US in 2023, is expected to retain some resilience.
However, sectors like metals, manufacturing, machinery, and agriculture are expected to bear the brunt of the tariffs.
Exports of aluminium and iron, valued at $1.5 billion (R27 billion), as well as manufactured goods such as cars ($1 billion or R18 billion) and machinery ($600 million or R10.8 billion), are projected to take significant hits.
Agriculture, which accounts for about $350 million (R6.3 billion) in exports, could also see a marked decline.
The automotive industry, already grappling with multiple challenges, is particularly vulnerable, as outlined by several reports.
The sector is crucial to South Africa’s economy, directly employing over 110,000 workers and supporting around 500,000 jobs across the value chain.
However, it has faced declining domestic demand as more consumers turn to used vehicles and export markets soften.
Additionally, the global transition to electric vehicles (EVs) poses a significant threat.
While international markets pivot towards EVs—spurred by the European Union’s impending ban on internal combustion engine vehicles by 2035—South African manufacturers have been slow to adapt, risking obsolescence.
Manufacturing, a vital pillar of South Africa’s economy, is similarly at risk.
The sector has been on a steady decline, with output shrinking by 5% since 2019.
Between April 2023 and March 2024, the industry shed 50,000 jobs, bringing total losses to 150,000 since the pre-pandemic period.
Sub-sectors like automotive, glass, and non-metallic minerals have been particularly hard-hit, exacerbating unemployment in a country already battling high joblessness rates.
Agriculture, while a rare bright spot with 13.5% growth in early 2024, also faces a precarious future.
The sector’s performance will not only be undermined by the increased tariffs but also by domestic issues.
The sector has faced persistent challenges in 2024, including logistical inefficiencies, climate-related risks, and outbreaks of animal diseases.
Water shortages, exacerbated by poor infrastructure and a failing water supply system, further compound the risks to agricultural productivity.
Despite its crucial role in employment and food security, the industry’s long-term outlook remains uncertain.
These pressures on manufacturing, mining, motoring, and agriculture strike at the heart of South Africa’s economic fabric.
Together, these industries are not only significant contributors to GDP but also key employers.
Any additional strain, such as the projected export losses from US tariffs, could deepen the country’s socio-economic challenges, increasing unemployment and widening inequality.
In this context, Trump’s tariff policies loom large as a potential tipping point for South Africa’s biggest employers.
The next few years will demand strategic foresight and decisive action to mitigate these risks.
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