While the recent tariff announcement by US President Donald Trump is not new, the “disruptive impact” of those tariffs will continue to undermine domestic economic activity in the second half of 2025, says Jee-A van der Linde, senior economist at Oxford Economics.
Van der Linde specifically referred to private-sector investment, which declined by 1.7% quarter to quarter in the first quarter.
Oxford Economics has already slashed its 2025 growth forecast almost in half to 0.8%, citing the tariff shock and coalition wrangling in Pretoria.
Van der Linde is also concerned that the existing supply-side constraints will worsen the impact of US tariffs on domestic exporters.
“Given SA’s frail economy, businesses can also ill afford defiant posturing from the government and retaliatory measures are therefore considered unlikely,” he said.
Old Mutual chief economist Johann Els said the impact on the economy “won’t be more severe than what we expected before”, adding that the impact would be sector-specific, with vehicles, citrus and wine the most exposed.
“So there will be an impact, but it won’t be an all-fall-down scenario,” Els said, with his growth forecast unchanged at 1.3%.
This is slightly above the Treasury’s GDP growth scenario released in the May budget, which assumes tariffs rising above 10% for a few countries.
“Growth among key trading partners is subdued, with global trade volumes, investor confidence and economic activity declining,” the Treasury said at the time, forecasting GDP to be 0.3 and 0.4 percentage points below the baseline in 2025 and 2026, respectively.
Annabel Bishop, Investec chief economist, said the toll on the motor and agricultural value chains could be severe if the full duty was enforced in August, even with partial exclusions for metals and minerals.
“While countries can seek alternative trade partners to the US it takes a substantial amount of time,” she said. “Additionally, there would also be an incentive for large foreign manufacturers currently operating in SA to move operations to the US.”
It is also clear that the latest US tariff decision offsets any remaining advantages of duty-free access enjoyed so far by SA under the African Growth and Opportunity Act (Agoa), said Raymond Parsons from the NWU Business School, adding that further uncertainty was the status of Trump’s threat to impose an additional 10% tariff on Brics countries.
“The global reality is that the aggressive US tariff policy is creating a fragmented world trading system that further elevates economic uncertainty, disrupts supply chains and hampers economic activity.”
But Parsons added that SA was not without remedies: “As a small open economy, it remains essential that bilateral negotiations must continue to stabilise and consolidate future US-SA investment and trade relations.”
This is Pretoria’s plan.
“This 30% tariff is based on a particular interpretation of the balance of trade between SA and the US,” the presidency said in an earlier statement, noting that average duties on goods entering SA were just 7.6%.
“This contested interpretation forms part of the issues under consideration by the negotiating teams from SA and the US.”
According to Parsons, the government and the private sector must continue to seek alternative markets, regardless.
Markets seem to have largely taken the latest news in their stride. “Most of this is priced in already,” Els explained. “This is a negative, but it’s not a new negative … and there’s still a possibility this isn’t final.”
He said as the 30% headline rate was the same figure flagged in April, it was baked into most growth forecasts.
Van der Linde still expects the Reserve Bank’s monetary policy committee (MPC) to cut rates by 25 basis points at their next meeting on July 31.
Els also sees room for an MPC rate cut, though he cautions it is likely to be a more “hawkish” move due to recent tariff risks.
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