How the US tariffs could impact your finances
As trade talks between the United States and South Africa unfold, the proposed tariffs on key exports of goods from South Africa could have a ripple effect on your wallet. Here is what you need to know.
1. Tariffs on the table
The US administration has proposed a new wave of tariffs on South African goods, including 25% on steel and aluminium, 25% on vehicles, and 10% on various other items. These levies, essentially a tax on imports, raise the cost of South African products in the US and could dampen demand. Previously, South Africa benefited from the African Growth and Opportunity Act (AGOA), which allows zero or low tariffs on most goods exported to the US. AGOA expires at the end of September, and SA is in negotiations with the US to formulate a new bilateral trade agreement, which is expected to be ironed out in July. Until the new agreement is in place, the proposed tariffs could impact the retail sales of these goods, and affect consumers, employees, and businesses in the US and SA.
2. What we export and what’s at risk
The US is SA’s second-largest export market, comprising around 8% of the total exports. While mining commodities, which make up half of these exports, remain largely duty-free, tariffs on vehicles (17% of exports) and agriculture (5% of exports) could slow demand from US buyers.
This is especially significant for local automotive manufacturers, as the US is the third-largest destination for South African-made vehicles. Agricultural exports may receive seasonal tariff relief during non-harvest periods in the US a point currently being negotiated.
3. Tariffs and US consumer demand
Tariffs tend to fuel inflation, and in the US, that could mean higher retail prices on imported goods, including those from South Africa. The final impact on demand will depend on factors such as:
- How much of the cost increase US retailers absorb
- How much gets passed on to consumers
- Whether exceptions or pricing strategies are included in the final trade agreement
If strategic clauses like duty-free windows or price breaks for US buyers are introduced, the impact of higher tariffs could be softened.
4. Looking beyond the US
While the US is a critical trading partner, it’s worth noting that 92% of South Africa’s exports are destined for other markets. There are also attempts to increase product coverage in existing markets and expand to new markets. One such initiative is the African Continental Free Trade Area (AfCFTA), where tariffs are gradually eliminated on trade across the continent, presenting new markets for expansion.
5. A mixed picture of growth
Despite the uncertainty, the rand has strengthened against the dollar since the tariffs were introduced – a sign of confidence in the market and hope for a positive trade outcome.
While the fuel levy increased in May as announced in SA’s national budget, the stronger currency and lower oil price resulted in lower prices for petrol of 5c and diesel of 32c. GDP grew 0.4% in Q1 2025, and the South African Reserve Bank (SARB) expects a modest improvement, forecasting 1.2% growth for the full year. With inflation sitting at 2.8% in April, comparable to 2.7% in March, the SARB lowered the prime lending rate by 0.25% to 10.75% in May, further providing some relief to consumers.
The takeaway
While the new US tariffs present a short-term challenge, South Africa is well-positioned to absorb the impact thanks to its varied export markets, resilient economic health, and ongoing efforts to expand trade to new markets. We will closely track the AGOA negotiations to provide timely updates on what these developments could mean for your investment and personal financial planning.