Africa-Press – South-Africa. South Africa finds itself on the receiving end of increasing pressure from the United States, in the form of tariffs on goods exported to the superpower and policy changes that seek to review relations between the two countries.
This review may result in targeted sanctions against political officials, more severe tariffs, and even a potential ban on American investment in certain South African assets.
Tariffs, in turn, will impact South Africa’s local economy, but it is unclear how severe the effects will be on the overall GDP.
So far, these measures appear to have had little effect on the poorly-performing local economy, with a small share of exports going to the United States and most of South Africa’s problems being homegrown.
However, the United States’ targeting of South Africa has impacted sentiment towards the country, and prolonged conflict, even diplomatic, will exacerbate this.
This is feedback from Melville Douglas chief investment officer Bernard Drotschie, who outlined how South Africa is surfing the Trump tsunami in 2025.
Drotschie explained that South African exports to the United States are relatively small, at around only 8% of the total, in comparison to the European Union and China, which each consume around 20% of local exports.
Nearly half of the total is exported to the United States, which includes precious metals and minerals, which are currently exempt from tariffs.
As a result, the country is surprisingly resilient to tariffs from the United States, with Drotschie only anticipating a 0.2 percentage point impact on GDP growth.
Drotschie also explained that this resilience is coupled with a declining shock factor, which can only really be applied once before economies and companies become used to it.
Countries and companies are already searching for alternatives to the US market, which will be difficult to find. However, for South Africa, it may be relatively easier, considering its export mix, which is mainly made up of commodities.
China’s overall exports were 7% higher than a year ago in July, however. Almost 20% of its exports went to the US before Trump’s first term. That number has halved, but China’s export machine remains in rude health.
This suggests that China has managed to diversify its export base to make it less dependent on a single market.
To underscore this point, Danish shipping giant Maersk upgraded its profit outlook recently, saying that strong trade growth in the rest of the world was compensating for weakness in the US.
In a classic case of companies adapting to changing conditions, it thinks US tariffs might even be good for business as customers seek a one-stop shop for logistics needs, given increased complexities.
As a result, despite the significant shift in trade policy from the United States shown in the graph below, the global economy appears to be chugging along.
Temporary relief
There are concerns that the lack of impact from tariffs is because of temporary relief from companies stockpiling goods in anticipation of increased duties and a short-term boost from central banks cutting interest rates.
In the build-up to Trump’s tariff announcement on ‘Liberation Day’ in April, US companies began stockpiling products crucial to their manufacturing processes and sales.
This has softened the immediate impact of tariffs, but it cannot last forever. Declining exports from China to the US appear to indicate that the effects are beginning to be felt, Drotschie said.
Herein lies a much bigger threat to South Africa. If tariffs impact the economic performance of its other major trading partners, the country’s exports could be significantly impacted.
China is the source of demand for most of South Africa’s commodity exports, generating vital foreign exchange earnings for the country.
This, in turn, supports the value of the rand and makes it cheaper for South Africa to import goods, reducing inflation and dragging interest rates down.
If the Chinese economy begins to slow down, this script could flip. Exports from South Africa will decline, the rand may weaken, and inflation will pick up.
While this is a serious threat, Drotschie expects businesses to be able to adapt fairly easily, as long as there is some stability when tariffs settle at various levels.
After a period of difficult adjustment, life will go on. Businesses around the world will adapt as they always do, though some certainty will go a long way. The longer tariff levels jump around, the more difficult it is to plan.
Importantly, for the time being, most countries seem keen to expand trade among themselves, irrespective of what the United States does.
The US will probably eventually return to a more pragmatic trade policy, especially if Americans’ complaints over higher prices and fewer choices continue.
In South Africa, the 30% tariffs on exports to the US are a headwind but might be lowered in due course. Whether this happens in time is an open question.
There are also other economic offsets, with the Reserve Bank having cut the repo rate by 1.25 percentage points over the past year, while lower inflation, currently around 3%, raises real income growth.
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