South Africa Holds Steady as Trump’s Tariff Hits Land

Despite the upcoming US tariff hike, economists say the country’s growth prospects remain solid

On paper, a 30% tariff from one of your biggest trading partners should spell trouble. But in South Africa’s case, it seems the economy has a sturdier backbone than many might have thought.

Come 1 August 2025, the United States will slap a 30% tariff on South African exports, a move driven by President Donald Trump’s ongoing “America First” campaign. It’s a harsh blow, especially considering America is among South Africa’s top trade partners. But economic experts are telling a more optimistic story.

Less Pain Than Expected

Old Mutual’s Chief Economist Johann Els isn’t sugar-coating the tariff’s potential impact, but he’s also not ringing the alarm bells.

“Only around 8% of South Africa’s exports go to the US,” Els explained. “That number’s small, and it’s not vanishing overnight.” He also expects exemptions to soften the blow. The real economic lifeblood, it seems, flows more from China and the Eurozone, both of which are forecast to remain healthy trading partners.

In fact, while the US edges toward possible recession, the rest of the world appears open for business. Global consumers still demand value for money and South African goods remain competitively priced in many markets outside the US.

More Than Just Trade Winds

Looking inward, South Africa has a few of its own positive cards to play. According to Els, GDP growth is expected to climb to 2.5% in the medium term, a welcome change from the 1.1% average South Africans have grown used to over the past 15 years.

That brighter outlook isn’t just about external markets. There’s real traction happening locally, especially with increased private sector involvement in key sectors like energy and water, both long-standing bottlenecks.

Operation Vulindlela, the economic reform initiative co-led by the Presidency and National Treasury, is quietly gaining momentum, tackling the sort of deep structural issues that have long held the country back.

Why Investors Are Starting to Look Again

Even with US hostility on the cards, South Africa seems to be attracting fresh attention from investors. Global uncertainty, especially around the US economy’s trajectory, is pushing a more risk-on approach in emerging markets.

South Africa benefits from strong institutions, a stable financial sector, and relatively consistent political governance, especially in light of the recent formation of the Government of National Unity (GNU). For once, the political mood is cautiously optimistic, and that alone may be enough to bolster growth sentiment.

Even the country’s debt profile is improving, with the Treasury managing to keep debt-to-GDP at 70%, a far cry from the 95% once forecast in 2020.

Short-Term Gains, Long-Term Hurdles

So, what lies ahead for the rest of 2025?

Els expects an interest rate cut in July, likely the last one of the year and a potential announcement of a lower inflation target from the South African Reserve Bank by year-end. While that lower target might result in short-term rate hikes, it should pave the way for more meaningful rate cuts by 2028.

Growth is expected to inch up to 1.6% in 2026, then 2.2% in 2027, and finally reach 2.5% in 2028. That’s steady progress — but not nearly enough to tackle South Africa’s deep-seated issues, including high unemployment, skills shortages, and social inequality.

Els was clear: 5% growth is what South Africa truly needs to turn the tide, but that level remains unlikely without sweeping changes to education, labour market flexibility, and productivity.

It’s Not All Doom and Gloom

Yes, Trump’s tariff announcement is a setback. But in the broader scheme of things, it may be a relatively small wave in a much bigger economic tide. South Africa’s fundamentals are improving, slowly but surely. Reforms are underway, confidence is inching upward, and international investors are beginning to circle again.

It’s too early to celebrate, but it’s certainly not time to panic.

{Source: BusinessTech}

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com