Blows to South Africa keep coming

The impact of the United States’ new 30% tariff on exports, along with a likely exit from the African Growth and Opportunity Act (AGOA) and the potential shakeup of the Government of National Unity, is crushing the country’s prospects for growth.

This is according to Investec chief economist Annabel Bishop, who said that the events over the past 24 hours may have wiped as much as 0.5 percentage points from GDP growth in 2025.

It will also drive up inflationary pressure, which will likely impact a host of local conditions, including the prospects for interest rate cuts.

Bishop noted that US President Donald Trump’s global ‘reciprocal’ tariff announcement represented an escalation of America’s trade war, which pushed up inflation projections, reversed interest rate cut expectations, and generally dampened markets.

She said the tariffs hit global sentiment hard and fast, with expectations ahead of the announcement already causing economic activity to falter.

“While the US’s tariff increases are not set in stone, representing instead a ‘starting point’, financial markets have had a markedly negative reaction, and further volatility is likely on adjustments, either up or down, causing uncertainty to persist,” she said.

The impact has been worse for South Africa, as the resultant volatility exacerbated already strained trading due to its internal political strife.

Trump has set a ‘discounted’ reciprocal tariff of 30% on South Africa, though many of the country’s key exports are exempt, including gold, coal, platinum and other metals.

Regardless, South Africa will still be hard-hit by the tariffs, especially the agriculture and automotive sectors.

Making matters worse, these sectors are likely to suffer even more, with Bishop expecting South Africa to be booted from AGOA benefits.

AGOA gives South Africa preferential access to the United States—something of an anathema to the Trump administration.

Even before Trump’s second term as president, South Africa’s including in AGOA was in question. The Act is up for renewal in September 2025, and many economists and analysts expect it to end.

However, South Africa could be expelled from the Act long before that through an executive order, with some analysts expecting exactly that.

Ultimately, Bishop said that these events will cut South Africa’s GDP prospects for the year, with Investec now anticipating 1.3% growth in 2025, down from previous estimates at 1.8%.

Interest rate impact

According to RMB currency strategist Manqoba Madinane, the weaker rand as a result of all the high drama around tariffs and the GNU will likely play into the South African Reserve Bank’s monetary policy.

However, this is unlikely to be an immediate impact, as these risks have been factored into monetary policy.

It is one of the key reasons that the Monetary Policy Committee has not been aggressive in its rate cuts, and has long erred on the side of caution.

Madinane said the SARB’s global and currency risk concerns have now materialised, and the hurdle for instituting previously anticipated policy rate adjustments may have been lifted higher.

More critical, however, is how the SARB interprets the inflationary effects of the forthcoming US reciprocal tariffs.

“That will weigh more heavily on their decision-making than currency fluctuations, which could fade in coming days,” Madinane said.

Government needs to do something

Responding to the tariff announcement on Thursday, the office of the presidency said that it was “concerned” by what it called punitive charges.

However, it showed the urgency of mending relations between South Africa and the United States and establishing new trade terms.

Adriaan Pask, CIO at PSG Wealth, said that the tariffs on South Africa should be a wake up call to the government.

“Obviously, the tariffs are negative for South Africa, but there are also some very tough lessons to learn from this as our foreign relations and diplomatic efforts did not function well and likely worsened the situation,” he said.

This is exactly the opposite of what diplomatic efforts are designed to achieve, he added.

Minister of Trade, Industry and Competition Parks Tau said that the US’s tariff rate of 30% did not make sense as South Africa’s tariffs are estimated at an average of 7.6%.

The Trump administration did not use actual tariff policy to determine its rates, but instead used a formula based on the trade balance.

Data from the US Department of Commerce showed that the US trade balance with South Africa was $8.8 billion in deficit, as exports totalled $5.8 billion and imports $14.5 billion.

Plugging these values into the formula resulted in a value of -60.6%, indicating the US needed to impose a 60% tariff to get the balance to zero. This was ‘discounted’ to 30%.

Regardless, the minister said that South Africa is committed to engaging with the United States about the future of trade relations between the two countries.