Are industries ready to tackle the new US tariffs?

Staying ahead of the impact of US tariffs on exports

Blog
8 minute read
May 27, 2025

On 2 April 2025, US President Donald Trump announced sweeping increases in tariff duties on imported goods from almost all countries around the world, with South Africa facing a rate of 30%.

On 9 April 2025, the US announced a universal 90-day pause on the increased tariffs from a week earlier to a uniform 10%, while the increased tariffs on Chinese imports were reduced from 145% to 30% after bilateral negotiations. China also reduced their own reciprocal tariffs on US goods from 125% to 10%. While this is seen as a promising sign that could potentially lead to established tariff ranges for countries—market expectations are that overall US tariffs will remain higher than before. South Africa must therefore remain proactive. Businesses and policy makers must prepare for a post-pause period to safeguard South Africa’s trade interests.

Higher tariffs will significantly impact on the global trade community—affecting various industries—raising concerns about the future of international trade relations. The increased tariffs are expected to disrupt supply chains, raise costs for consumers, and affect foreign direct investment and competitiveness across multiple industries.

Director-General of the World Trade Organisation (WTO) Ngozi Okonjo-Iweala has expressed deep concern about the uncertainty in global trade policies, especially the US-China stand-off. She indicated that “the recent de-escalation of tariff tensions has temporarily relieved some of the pressure on global trade. However, the enduring uncertainty threatens to act as a brake on global growth, with severe negative consequences for the world, particularly the most vulnerable economies”.

The WTO estimates that world merchandise trade will shrink by 0.2% in 2025, after growing by 2.9% in 2024. Without high tariffs and uncertainty, trade growth could have been 2.7% in 2025 and 2.9% in 2026. Africa's export growth is expected to slow from 0.7% to 0.6%

Despite these challenges, Okonjo-Iweala remains enthusiastic because “WTO members have the unprecedented opportunity to inject dynamism into the organisation, foster a level-playing field, streamline decision-making, and adapt our agreements to better meet today's global realities.”

As we explore the top export chapters¹impacted by these tariff changes, we will uncover the effects on South Africa's economy and the critical steps needed to protect its trade interests.

From precious metals and automotive exports to agricultural and chemical products, we will look at the chapters that are most vulnerable to tariff hikes and potential strategies to mitigate their impact.

To provide a comprehensive understanding of these tariff changes, we conducted and initial analysis focusing on the top 10 highest export chapters from South Africa to the US—including chapters with the highest percentage proportion of its total exports directed to the US. This dual approach captures both the absolute and relative significance of these exports—offering a balanced view of the economic impact.

The visual representation highlights the total export values for various chapters and their projected number of jobs at risk by imposing an additional 10% tariff on South African exports.

Additionally, we performed a sensitivity analysis on different levels of tariffs (10%, 30%, 60%) to assess their impact. While various scenarios were explored, we believe that the actual tariffs imposed might be lower than initially anticipated.

Although only about 6%² of South Africa's exports go to the US, the knock-on effects can be significant. The impact extends beyond immediate economic repercussions, affecting foreign direct investment, competitiveness and the job market.

Additionally, tariffs in other regions can also influence the South African economy. For instance, the ongoing stand-off between China and the US has far-reaching consequences. A slowing Chinese economy will inevitably impact Africa. According to the IMF, a 1% decline in China’s growth rate could reduce average growth on the continent by 0.25% within a year, and for oil exporters, it could be as much as 0.5%.

Understanding these tariff impacts is crucial, as they will not only affect South Africa's economy but also reshape the global trade landscape.

To illustrate the broader implications of these tariff changes, we will highlight the specific chapters that are significant due to their export volumes. By focusing on chapters with both high and low percentages of exports to the US, we can understand the impacts better.

Natural or cultured pearls, precious or semi-precious stones and metals

This chapter covers high-value commodities like natural or cultured pearls, precious or semi-precious stones and precious metals. These items are crucial in international trade due to their high value-to-weight ratio and demand in luxury markets.

In 2024, South Africa exported approximately R55bn worth of these goods to the US, making up about 15% of South Africa's total exports in this category. For comparison, South Africa exported R51bn (14%) and R38bn (10%) of these goods to Japan and the United Kingdom respectively, in the same year.

Given the specialised nature of these commodities, finding alternative markets to absorb such volumes at similar price points could be challenging.

If the US imposes an additional 10% tariff on these goods, we estimated that around 2,700 jobs could be at risk within this chapter and its related supply chain. These job losses would not only affect those directly employed but also have broader socio-economic impacts due to reduced household incomes and increased unemployment. The ripple effect would impact related industries such as mining, processing and retail.

With varying tariff rates across countries, investors might reconsider their investments in South Africa—potentially withdrawing funds and hindering industry and overall economic growth.

A significant drop in export revenues would negatively impact South Africa's trade balance—leading to currency depreciation. Higher import costs. And reduced consumer purchasing power.

Lower export volumes would result in reduced tax revenues from corporate profits—affecting government spending on public services and infrastructure.

Aluminium and articles thereof

While this chapter has a relatively low export value to the US in comparison to the natural or cultured pearls, amounting to R9.8bn, it represents a significant 24.6% share of South Africa's total export volumes within the chapter. The imposition of tariffs on these goods would therefore have substantial repercussions particularly in terms of market share and employment.

The imposition of a 10% tariff on aluminium and related articles is expected to result in a significant market loss, primarily due to the increased costs for buyers. This additional expense is projected to lead to a decrease in demand, amounting to an estimated R63m. While this figure represents the minimum impact of the 10% tariff, there is a substantial risk of losing an even larger market share. It is further estimated that around 160 jobs³ will be at risk across the industry. These are likely highly skilled roles within a specialised, capital-intensive industry.

Increased tariffs would lead to disruptions in the supply chain, affecting the availability of raw aluminium, scrap, powders, flakes, pipes etc. Higher tariffs would increase production costs for manufacturers relying on these materials, leading to higher prices for consumers or reduced profit margins for companies trying to absorb these costs. This would directly reduce the industry's competitiveness compared to those from countries with lower tariffs or more favourable trade agreements with the US, further impacting this chapter.

The imposition of tariffs on US exports will significantly impact local and global value chains, regardless of historical export volumes. To mitigate these effects, we can: Diversify export markets to reduce dependency on the US. Restructure supply chains by processing goods in countries with favourable US trade links. Negotiate long-term contracts with tariff pass-through clauses to share the burden with buyers. And use hedging and pricing strategies, like locking in long-term forward contracts, to manage financial impacts.

While these strategies can help mitigate the impact of tariffs, widespread adoption will lead to increased competition and opportunities.

The combined impact across South Africa’s top 10 export chapters to the US reveals that approximately R5.9bn potential market loss, primarily due to the increased costs for buyers and an estimated 13,200 jobs are at risk. This highlights the broader economic threat a 10% tariff could pose—not only to exporters, but also to the national economy, workforce and fiscal stability.

How can we turn challenges into opportunities?

How do we transform obstacles into pathways for growth? The answer lies in our ability to innovate and adapt.

We need to focus on developing strategies to mitigate these impacts and unlock new value and opportunities. Drawing on our "Value in Motion" framework, we should prioritise the "make" and "build" domains. By enhancing manufacturing capabilities and investing in robust infrastructure, we can create a solid foundation for sustainable growth. This approach not only addresses the immediate challenges posed by the tariffs but also positions us to thrive in the evolving global landscape.