ERNST VAN BILJON: Tariffs, Agoa and the shifting global landscape in SA-US trade

In an era of evolving global trade policies and economic nationalism, SA’s trade relationship with the US faces mounting challenges.

The US remains a major trade partner for SA, ranking among its top 10 export destinations. In 2023 SA-US trade totalled $17.41bn, with SA enjoying a trade surplus. Key SA exports include precious metals such as platinum and gold, motor vehicles, citrus fruits, wine and industrial components. The US exports machinery, electronics, aircraft parts, chemicals and agricultural products to SA.

The US tariff threats appear to be less about immediate enforcement and more about strategic leverage — a textbook negotiation tactic reminiscent of US President Donald Trump’s The Art of the Deal. Trump’s decision to delay tariffs on Canada and Mexico signals a broader approach: using the prospect of trade penalties as a bargaining tool rather than a definitive course of action.

For SA this creates uncertainty. Will tariffs materialise, or are they merely a pressure tactic? If implemented, the economic effect could be severe. If not, businesses must still brace for evolving trade dynamics. Regardless of the outcome, SA’s path forward is clear: agility is paramount. By diversifying trade partnerships and deepening regional and continental ties, the country can navigate shifting global trade currents with resilience and foresight.

A major contributor to this trade flow is the African Growth and Opportunity Act (Agoa), which allows duty-free access for many SA exports to the US. However, as geopolitical tensions and trade policies shift, SA’s continued inclusion in Agoa is under scrutiny.

Agoa has been instrumental in fostering trade, particularly in agriculture, automotive and manufacturing. However, SA’s growing alignment with the Brics bloc and its diplomatic stance on global issues may put its Agoa benefits at risk. If the US imposes broader tariffs or revokes SA’s eligibility, local exporters could face higher costs, making their products less competitive. Losing Agoa privileges would force businesses to seek alternative markets or absorb higher costs, disrupting supply chains and badly affecting job security within export-driven industries.

While trade disputes often frame tariffs as costs borne by exporters, the economic reality is different. US importers ultimately shoulder the financial burden and pass increased costs onto consumers. The US government argues that tariffs encourage domestic manufacturing, but in practice:

• Establishing new manufacturing infrastructure takes years.
• US-made goods remain more expensive due to higher labour and production costs.
• Global supply chains are deeply integrated and cannot be restructured overnight.

Should tariffs be imposed, SA exporters will probably see reduced US demand due to rising costs. US buyers may pressure SA suppliers to lower their prices to absorb some tariff impact, squeezing margins. Industries such as mining, wine, citrus and automotive manufacturing could face financial strain, leading to cash flow challenges, production slowdowns, and job losses.

The ramifications of US protectionism extend beyond direct trade. SA supply chains linked to the US in industries such as automotive, mining and manufacturing face heightened uncertainty. Additionally, if the EU also faces tariffs and shifts sourcing strategies, SA could suffer secondary effects. Although specific tariffs against Europe have not yet been implemented, the threat remains. Currency volatility, rising logistics costs and hesitancy in long-term investments further complicate the economic landscape. SA businesses reliant on US components may also see increased costs, putting additional strain on domestic production.

Tariffs accelerate deglobalisation, a trend already growing due to geopolitical shifts, economic nationalism and supply chain disruptions. The US is incentivising companies to source from closer or allied regions, benefiting Mexico and Eastern Europe while disadvantaging SA. Policies encouraging regional alternatives (“nearshoring” and “reshoring”) could reduce demand for SA exports.

SA’s infrastructure and energy challenges further limit its appeal as a nearshoring hub. While African nations seek to strengthen regional trade, the continent lacks the industrial depth to fully replace traditional global supply chains. However, friendshoring — trade realignment among politically aligned partners — presents potential opportunities. SA could strengthen ties with China, Southeast Asia and fellow Brics nations. China’s Belt and Road Initiative and partnerships with India, Brazil and the Association of Southeast Asian Nations countries offer alternative trade avenues. SA could also reposition itself as a strategic logistics hub for intra-African trade.

Despite these challenges, SA businesses can take proactive steps by:

• Diversifying export markets beyond the US to Asia, the Middle East and Latin America;
• Boosting intra-African trade through the African Continental Free Trade Area (AfCFTA;
• Strengthening domestic industrial capabilities despite challenges such as energy instability and high production costs;
• Attracting increased foreign investment from China and India as supply chains realign; and
• Identifying sectors that remain competitive despite tariffs, such as mining, renewable energy components and high-value agricultural exports.

SA’s trade relationship with the US is at a crossroads. While Agoa has provided significant advantages, rising global protectionism threatens its stability. By proactively diversifying its trade partnerships and strengthening domestic industries, SA can navigate this uncertain terrain and emerge more resilient in the shifting global economy.

• Dr Van Biljon is head lecturer and programme co-ordinator for the MCom in supply chain management at IMM Graduate School.