Reality check over Trump’s threat to South Africa

On November 30, 2024, United States (US) President-elect Donald Trump took to social media with a stern warning for BRICS+ nations, including South Africa: commit to supporting the US dollar or face severe economic consequences.

In his post, Trump declared, “The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER.”

He went on to threaten 100% tariffs on any country that seeks to replace the US dollar with another currency, stating that these nations would have to “say goodbye to selling into the wonderful US Economy.”

Experts say that this should not be taken lightly as if Trump does follow through, it would significantly impact South Africa and the US, ultimately shaking-up global trade relationships.

While this rhetoric is concerning, some experts also say that it is likely more about political posturing than imminent economic action; and is ultimately a double-edged sword.

The risks for South Africa

Emeritus Professor from the Nelson Mandela School of Public Governance at the University of Cape Town (UCT), Alan Hirsch, told BusinessTech that these comments should be taken seriously.

“South Africa’s exports to the US are not as large as its exports to the EU or China, but they are significant and much of the products exported to the US are relatively high in value-added, unlike the raw materials which China imports from South Africa,” said Hirsch.

According to figures from the South African Revenue Service (SARS), South African exports to the US amounted to R154.96 billion in 2023 – resulting in a trade surplus of R19.24 billion.

Tariffs would significantly diminish this.

Additionally, South Africa is part of the US’ Africa’s Growth and Opportunity Act (AGOA).

It provides duty-free access to the US market for almost all products exported from more than 40 eligible sub-Saharan African countries, including South Africa.

This is incredibly lucrative as it provides good access to the world’s largest economy, whose GDP sat at $27.36 trillion (R495.66 trillion) in 2023.

Experts say that the loss of AGOA benefits would hurt the economy, and could lead to a decline in foreign direct investment and economic growth.

Hirsch said that while the US President-elect’s utterances are a “disturbing threat, it is unlikely to be exercised during the four years of the Trump Presidency.”

Common currency ‘not on the agenda’

Honorary Professor at the Nelson Mandela School of Public Governance at UCT and former UN Assistant Secretary-General, Carlos Lopes told BusinessTech that Trump’s statement shows a misunderstanding of the BRICS discussions.

He said that the focus is on boosting trade with local currencies to reduce dollar dependency, not replacing it overnight or introducing a new currency.

Hirsch echoed this, saying that the BRICS nations are unlikely to agree on a single currency to replace the dollar in the near future, “so I would think that the threat is not imminent.”

Lopes said that the shift is not about replacing the dollar immediately, “but acknowledges the inefficiencies and vulnerabilities in the current system.”

South Africa’s government clarified that it has been wrongly suggested that BRICS plans to create a new currency.

The Department of International Relations and Cooperation said that discussions are focused on the increased use of national currencies in international trade and financial transactions to mitigate the impact of foreign exchange fluctuations, rather than focusing on de-dollarisation.

Lopes noted that while the threat to dollar dominance is overstated short-term, it aligns with long-term trends toward global diversification.

Trump and his economic advisers have been and are exploring ways to dissuade or punish those engaging in trade using currencies other than the dollar

This includes through export controls, currency manipulation charges, and trade levies.

Some experts in the US, such as Brad Setser, a senior fellow at the Council on Foreign Relations and a former Treasury official during the Obama administration, argue that these threats could undermine the dollar.

Setser said that it could sour relationships, thus increasing the likelihood of countries forming agreements to find alternatives to the US.

Lopes, said that the rhetoric “reflects a strategy of imposition and threats, which runs counter to the principles of multilateralism and effective international regulation.”

“The US economy remains important, but Trump’s approach seeks to assert dominance through unilateral actions rather than fostering mutually beneficial relationships,” said Lopes.

He added that such statements are likely driven by politics, trying to create a story that looks to maintain the status quo instead of making meaningful changes to the global economic power balance.

How to respond

Lopes suggested that South Africa should carefully evaluate the threats, but avoid overreacting because it is a double-edged sword.

“While the threat of tariffs is significant, it would also hurt US consumers and businesses reliant on BRICS goods and resources.

“South Africa’s strong trade relations with non-US markets and its integration into global supply chains mean it is not entirely vulnerable,” added Lopes.

Lopes explained that BRICS+ nations are expected to respond by trying to strengthen local currency trade and try boost economic sovereignty.

He added that they will likely avoid direct confrontation with the US, focusing on de-escalating tensions while building alternatives.

How G20 could help cool tensions

South Africa has officially taken the reigns of the Presidency of the G20, which puts it in a good position on the international stage.

Hirsch said that he does not think that the G20 summit process will be the right forum for South Africa to address this issue in a comprehensive way – “although it probably will come up.”

Lopes said that South Africa’s G20 presidency “provides a platform to mediate tensions and advocate for fairer global economic governance.”

“It can push for inclusive dialogue on financial stability, currency diversification, and the need for reforms in global institutions to reflect multipolar realities.”

Overall, Lopes said that he believes that “this episode underscores the importance of revisiting global economic governance to reduce reliance on unilateral mechanisms.”

He views that South Africa, and BRICS at large, “should continue pursuing reforms rooted in multilateralism, fostering global stability without capitulating to the politics of threats and coercion.”

“By staying the course and emphasising cooperation, BRICS nations can demonstrate the ineffectiveness of such posturing in a rapidly evolving world order,” added Lopes.

Read: The good and the bad for South Africa heading into 2025