Johannesburg, South Africa – South Africa’s economic landscape is bracing for another seismic shift as US President Donald Trump unleashes a fresh wave of import tariff hikes, with levies on steel and aluminium now soaring by up to 50%. This latest escalation, coming hot on the heels of April’s 25% increase, is sending shockwaves through local industries already reeling from global supply chain disruptions and mounting manufacturing costs.
The automotive sector, a cornerstone of South Africa’s industrial output, is particularly vulnerable, facing a significant reduction in competitiveness within the lucrative US market. In response, a growing number of South African businesses are aggressively seeking alternative markets in Africa, Asia, Europe, and the Middle East, a pragmatic move aimed at diversifying their export portfolios and reducing a precarious over-reliance on the United States.
The tariff announcement arrived amidst a delicate diplomatic dance, with South Africa and other US trading partners benefiting from a temporary 90-day tariff suspension beyond the initial 10% base levy. This brief window of opportunity was meant to facilitate strategic negotiations between President Cyril Ramaphosa and his US counterpart, providing a vital breathing space to safeguard key exports and explore new trade avenues. However, Friday’s decision to elevate tariffs on imported steel and aluminium from 25% to a staggering 50% has dramatically escalated Trump’s global trade war. The move came just hours after he accused China of reneging on an agreement to mutually roll back levies on critical minerals, drawing swift retaliation from the European Commission, which signalled its readiness to hit back, raising the specter of an all-out trade conflict between major economic powers.
While South Africa’s direct steel exports to the US are relatively limited, the impact will still be felt, according to Donald MacKay, the founder and CEO of XA Global Trade Advisors. “Aluminium is exported in far greater volumes, but the US has limited aluminium production, so prices will likely rise. This isn’t good, but it’s not devastating either,” MacKay observed, offering a glimmer of nuanced perspective amidst the gloom. Notably, South Africa’s aluminium sector had previously enjoyed exemptions from emergency tariff decisions due to the commodity’s scarcity status.
Despite the headwinds, optimism persists in some quarters. Muzi Manzini, the CEO of the Aluminium Federation of South Africa, expressed hope for a potential deal that could see South Africa committing to purchase US liquefied natural gas for a minimum of 10 years in exchange for steel and aluminium tariff exemptions.
Manzini also pointed to a potential legal lifeline. “Unless we’re back to the US’s haphazard tariff policy, the trade court’s ruling that the President lacks authority to impose tariffs may hold, despite the appeal. If this stifles Trump’s tariff plans, we could revert to rules-based World Trade Organisation processes,” he posited, hinting at a possible return to a more predictable global trade environment.
A recent PricewaterhouseCoopers (PwC) report, “US Tariffs vs South Africa: A New Economic Era?”, published on Friday, reinforces the grim reality. The report underscores how the tariffs have already disrupted trade volumes and supply chains, leading to reduced South African exports to the US due to higher costs. In response, the report highlights that South African businesses are increasingly leveraging the African Continental Free Trade Area (AfCFTA) agreement to bolster intra-African trade and regional economic integration. A key strategy emerging is the prioritisation of transforming raw materials into higher-value finished goods, thereby mitigating tariff exposure and fostering innovation.
The PwC report warns that the tariffs are likely to hit critical export sectors, particularly agriculture and automotive, both vital for national revenue and youth employment. As the US is South Africa’s second-largest bilateral trading partner, these shifts could trigger reduced exports, lower selling prices to offset higher US landed costs, and even potential job losses as American buyers seek alternative sources.
Yet, amidst these formidable challenges, PwC offers a glimmer of hope, emphasizing the significant opportunities presented by free trade agreements like the African Growth and Opportunity Act (AGOA) and AfCFTA. “Although Agoa’s future remains uncertain, it continues to be a valuable tool for South African exporters to maintain competitiveness in the US market,” the report concludes, suggesting that while the immediate future is fraught with uncertainty, strategic adaptation and regional collaboration could pave the way for South Africa to navigate this treacherous new economic era.
