True to the adage, “when the US sneezes, the entire world catches a cold”, world markets reverberated this week from Donald Trump’s trouncing of Kamala Harris in the bruising US election. And experts warn that Trump 2.0 could mean trade misery for South Africa — including expulsion from the well-established Agoa arrangement.
News of Trump’s victory hammered the rand and other emerging-market currencies on Wednesday, with the local currency seeing as much as 2.5% of its value erased. At one point it was trading at R17.82/$, but by Friday the rand had recovered to about R17.50/$.
Judging by Trump’s policies during his previous term, analysts expect a renewal of US trade wars with China and the EU. Some Asian and European countries are said to have prepared retaliatory measures and additional protections for their industries, in what some economic watchers have termed “Trump-proofing” of their economies.
Economists who spoke to Business Times this week said South Africa will struggle to fend off the harm that protectionist measures would cause. They said key figures in the Republican Party might seize the moment to renew the push to expel South Africa from the African Growth & Opportunity Act (Agoa) trade pact.
It might contribute towards driving South Africa in embracing warmly the likes of Russia and China, souring further the country’s economic relations with the West
— Azar Jammine of Econometrix
Azar Jammine of Econometrix said he fears Agoa could be scrapped altogether.
“Knowing Trump’s derogatory view of Africa and his lack of respect for the continent, the possibility of an abrogation of the Agoa agreement, which gives South Africa preferential access to US markets, has undoubtedly increased,” he said.
“This may have exacerbated the fallback in the rand. In turn, it might be argued that the disinflationary forces seen domestically of late might be neutralised somewhat.
“The fact that the Republicans have won the Senate will make it much more difficult for South Africa to retain its trade benefits vis-à-vis the US.” By Friday, the Republicans had the edge in the fight for control of the House of Representatives.
However, Jammine said this would not necessarily be “devastating” for the economy, while it could add impetus to the realignment of South Africa’s global trade relationships.
“It might contribute towards driving South Africa in embracing warmly the likes of Russia and China, souring further the country’s economic relations with the West,” Jammine said.
Prof Raymond Parsons of North-West University’s Business School said Trump’s return to office in January would have wide-ranging implications for the US and the world at large.
“While the decisive election mandate has strengthened political certainty within the US, it has heightened market volatility and uncertainty elsewhere, including among emerging economies. As a small open economy, South Africa has a vested interest in the multilateral trading system.”
A Trump victory brings the prospect of higher protectionism, posing a greater risk to South Africa’s overall exports. This will eventually affect the Agoa duty-free benefits, he said.
“South Africa will therefore need to redefine its economic diplomacy with the US in ways that safeguard the basic shared economic interests that we still have with America irrespective of political changes there.”
But economic analyst Duma Gqubule said the importance of Agoa to the South African economy was “over-exaggerated”.
“The impact of Agoa on the South African economy is overstated. This Agoa thing is just academic. These latest events in the US will strengthen the rand.”
Trump is the first Republican to win the popular vote since 2004. His return to the White House, combined with what is expected to be an overwhelmingly Republican House and Senate, could signal a major setback for climate change mitigation and globalism in the US and the world. In 2017, a year after taking over, he withdrew the US from the Paris Climate Agreement.
However, Wits Business School lecturer Lumkike Mondli is upbeat about what Trump’s second term means for South Africa.
“It’s a good story” for President Cyril Ramaphosa as South Africa prepares to host the Group of 20 summit next year, which Trump would be expected to attend.“Contrary to what some people are saying, there will be an influx of American investment in South Africa,” Mondli said.
“Trump’s focus is to boost the home economy, and this will result in more businesses opening up in America and they will then also invest in Africa. Agoa will be here, it’s not going anywhere.”
But Neva Makgetla, an economist at Trade & Industrial Policy Strategies, is among those who warn of risks for South Africa arising from Trump’s support for higher import tariffs.
“The US currently accounts for 15% of South Africa’s total exports,” she said. “A critical question is whether that will also affect trade under Agoa, which would impact most exports of manufactures to the US, including autos.
The impact would likely vary substantially by product, and depend especially on whether there are major competing producers in the US.”
Makgetla said about one-third of South African exports to the US, at least R55bn in 2023, consisted of platinum and catalytic converters. Unless the US tariff policy became “extraordinarily” broad, these exports should be largely immune because of South Africa’s status as the world’s top producer of platinum group metals.
“A seventh of South African exports to the US are assembled cars, which could be badly impacted if Agoa does not provide protection. These exports were valued at R20bn in 2023, equal to around a tenth of South Africa’s total exports of assembled cars. Cars are South Africa’s only major manufactured export outside of the mining value chain.”
Should the US pressure South Africa to scale back these associations, it may create diplomatic friction with current allies or even lead to punitive trade measures
— Bianca Botes, Citadel Global director
She said other exports to the US included aluminium, valued at R8bn last year and accounting for 30% of the total, and ferroalloys at R4bn.
US tariffs on steel imports from South Africa would probably be hiked further. Makgetla said efforts could be made to encourage support in the US for Agoa, although the political base for the agreement has been weakening for many years.
“The obvious way to manage this situation in economic terms is to develop alternative markets for affected products. That process will be made more difficult by the current slowdown in China and the EU, which the proposed tariffs would be likely to aggravate.”
Prof André Roux, economist at Stellenbosch Business School, said Trump’s victory did not augur well for South Africa, the rest of the African continent or the developing world at large.
“We know that he is very strong on protecting his own economy, so we can expect a swathe of tariffs against imports. This is bound to have some negative impact, possibly on Agoa.”
He said a second Trump administration meant US-China tension would ratchet up again, creating both collateral damage and collateral benefits for other nations.
“In the longer term, the fact that Donald Trump seems less enthusiastic about climate control and climate mitigation and climate change, of course, is not very positive for the world at large, not least of which Africa and South Africa,” Roux said.
Institute for Security Studies researcher Priyal Singh said Trump posed both challenges and opportunities for countries such as South Africa.
“It is likely that the clarity and predictability of US foreign policy toward sub-Saharan Africa, which the Biden administration has worked toward ... may become diluted and more opaque.”
Singh said African states needed to understand the core priorities and motivations of the Trump administration, which were based on a more insular worldview, tougher trade relations, higher tariffs on imports, confrontational foreign policy and scepticism about certain global institutions.
Citadel Global director Bianca Botes said South Africa’s ties in Brics with such countries as Iran might loom larger under a Trump administration and put the country in a “precarious” position.
“Should the US pressure South Africa to scale back these associations, it may create diplomatic friction with current allies or even lead to punitive trade measures, negatively impacting investor confidence and the rand,” Botes said.
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