The 31% “reciprocal” tariff imposed by the United States on South African goods in April 2025 was greeted with justifiable alarm across government and industry. Labeled as “punitive” by President Ramaphosa, this action, coupled with the uncertainty surrounding the future of the African Growth and Opportunity Act (AGOA), pose a serious threat to South Africa’s economy and its long-standing trade relationship with the US.
However, the prevailing narrative that South Africa is knocked out is dramatically overstated. A closer inspection reveals that the challenge, while significant, is surmountable. These tariffs must be viewed not as a catastrophe, but as the inevitable trigger for a necessary, long-term economic restructuring aimed at global resilience.
The self-defeating nature of the US Agenda
The current turbulence in global trade is rooted firmly in the US’s preference for using tariffs to achieve two cynical objectives: reshaping trade in its own favour and raising revenues to fund its huge fiscal deficit. Tariffs are, in the estimation of market analysts, a poor economic mechanism. They are expected to remain at elevated levels for the foreseeable future.
Globally, this punitive tariff agenda means the US has unequivocally lost its status as a trusted partner, guaranteeing that supply chains will inevitably be rerouted. This approach creates trade frictions that primarily reduce global efficiency and slow economic growth.
The impact on financial markets is evident: growth assets, particularly expensively priced US equities, face strong headwinds.
This turbulence simultaneously creates compelling opportunities in defensive assets, such as US Treasuries and South African government bonds, especially given the likelihood of future interest rate cuts driven by economic slowdown.
Nuanced impact and social risk for South Africa
For South Africa, the direct exposure to the US measures is manageable, though not insignificant. Only 4% of the country’s total exports are subject to the punitive 30% measures. Furthermore, 40% of the goods South Africa sends to the US are precious metals (like palladium and platinum), which remain exempt from the new tariffs.
Economically, the country faces substantial downgrades to its 2025 GDP growth forecast (reduced by 0.3 percentage points to 1.2%).
This slowdown is expected to result in a 35-to-70-billion-rand revenue loss in 2025 and a subsequent budget shortfall, potentially necessitating cuts in public service budgets.
Crucially, the inflation impact is nuanced. While tariffs are generally expected to be inflationary, causing the rand to weaken by 10% to 15% and raising the cost of imported goods, history suggests the primary effect will be a one-off impact on inflation followed by deflation due to slower growth. This deflationary pressure provides a rare silver lining, as it opens space for supportive monetary policy by central banks, likely resulting in lower interest rates to stimulate the economy.
The most catastrophic consequence, however, is social. The tariffs threaten potential job losses reaching 30,000–50,000 by mid-2026. Given the already alarming unemployment rate, which rose to 32.9% in the first quarter of 2025, any further growth in this rate would be disastrous, leading to increased social instability in affected areas and a direct consequence on the already high crime rate.
The Supply Chain imperative: adapt or perish
The ripple effects of the trade war are felt acutely in logistics. Globally, shipping costs have soared, straining port infrastructure and increasing lead times as companies rush to beat tariff deadlines. This uncertainty is forcing a “seismic shift,” with manufacturers rapidly reevaluating sourcing strategies and seeking alternative production hubs, particularly in Southeast Asia and India.
For South Africa, a vital link in the supply chain for Southern Africa, this turbulent global arena impacts local logistics, ultimately affecting the consumer through rising costs and shipping delays.
South Africa’s export-reliant sectors face significant vulnerability. The automotive industry, with the US as its third-largest market (R27 billion in 2023), would face catastrophic repercussions and job losses if AGOA access is lost. Similarly, citrus exports, heavily dependent on duty-free AGOA access, are in jeopardy, risking a drop in export earnings exceeding one billion rand. Producers in this sector must explore alternative markets and adapt production, for example, by converting fresh oranges into orange juice.
To mitigate these risks, diversification is crucial and should be considered Plan A. The immediate priority is to use the suspension period of additional US tariffs as a window for strategic negotiations. However, long-term resilience requires proactive structural shifts from both government and businesses. Trade officials rightly emphasise that diversification is “not a plan B but a plan A for long-term resilience and competitiveness.” With the US no longer seen as a fully trusted partner, South Africa is actively expanding trade relationships across Asia (including China, Japan, Vietnam, Thailand, and India) and the Middle East. Successes like securing duty-free access for various fruit varieties in China demonstrate the potential of this strategic pivot. The government’s Export Support Desk further aids companies in redirecting their focus.
The African Continental Free Trade Area (AfCFTA) is central to South Africa’s economic vision. By reducing tariffs and non-tariff barriers, AfCFTA aims to create a single continental market of 1.4 billion people, which can offset the negative impacts of US tariffs by providing new markets within Africa. South Africa is actively working to finalise value-chain protocols in key areas such as automotive, agro-processing, pharmaceuticals, and textiles. Full implementation of AfCFTA could boost the South African economy by 11.6% by 2043, with a significant increase in manufacturing.
Businesses also need to adopt sophisticated strategies to maintain competitiveness. This includes ensuring accurate tariff classification and considering product modifications to manage liabilities, as well as establishing operations in free trade zones for tariff exemptions and duty deferrals. Traders should leverage platforms like TradeMap for market analysis and utilise customs compliance software to adhere to regulations and minimize delays. Furthermore, companies must diversify their sourcing to reduce dependency on high-tariff markets by exploring alternative suppliers and markets within Africa, China, and the EU.
Finally, South Africa must prioritise beneficiation – transforming raw materials, which currently account for 70% of exports, into higher-value finished goods. Exporting fully manufactured consumer and capital goods is vital to reduce reliance on commodities and provide a significant boost to the economy. While localisation is sometimes suggested to shield the economy, experts caution that focusing solely on the small domestic market overlooks the vast export opportunities available globally.
While the US tariffs could lead to job losses and slower economic growth in South Africa, these negative effects are not severe enough to threaten the country’s entire economy because only a small portion of South Africa’s total exports are directly affected by these tariffs. The Reserve Bank anticipates only a modest effect on economic growth, trimming it by approximately 0.1 percentage points. Governor Lesetja Kganyago has described the tariff move as “a setback, but not catastrophic,” emphasising that while the US is an important trading partner, Europe, China, and the SADC region are more critical to South Africa’s overall trade balance.
Sub-Saharan Africa’s economic growth is expected to remain steady at 4.1% in 2025, with a modest pickup in 2026, reflecting ongoing progress in macroeconomic stabilisation and reform efforts across major economies in the region. While tariffs on exports to the US have increased, the direct exposure of most countries in the region to the US is limited.
This situation necessitates an immediate commitment to diversification and structural reform. By leveraging AfCFTA, focusing on high-value exports, and adopting sophisticated operational strategies, South Africa can successfully navigate this geopolitical challenge and transform it into an opportunity for long-term economic resilience and a stronger global standing.
By Lebo Letsoalo, MD and Founder of supply chain advisory and consultancy firm SINCPOINT