South Africa’s saving grace

South Africa’s economy is expected to remain resilient in the face of tariffs from the United States, as the country’s major trading partners are projected to achieve a stronger economic performance than initially anticipated in 2025. 

South African exports to the United States will face elevated tariffs at some point in the future. The questions are when and how severe the duties will be. 

This will have an impact on the country’s exports and economic growth, but it will be less significant than many think, as the United States only accounts for around 8% of South African exports. 

In contrast, the European Union (EU) and China both account for around 20% of South Africa’s exports, respectively, with Chinese demand for commodities being particularly significant for the country’s economy. 

As a result, more attention should be paid to how these economies are performing and how they could be impacted by tariffs from the United States. 

This is feedback from Old Mutual’s chief economist, Johann Els, who recently revealed his updated macroeconomic outlook for South Africa. 

One of the major factors influencing this outlook is at what level US President Donald Trump’s tariffs will settle for South Africa and major economies. 

Tariffs on South African exports to the United States will have an impact on the local economy, with Standard Bank estimating that a 10% increase in duties will result in a 0.1% reduction in GDP growth. 

This may seem small, but the bank expects South Africa’s economy to only grow by 1.1% in 2025, meaning that a 30% increase in tariffs could shave off a quarter of the country’s desperately needed growth. 

Els explained that the impact will be offset by an improved economic performance from the EU and a more resilient Chinese economy. 

These two economies consume nearly half of all South African exports, making them relatively more important trading partners for South Africa. 

China, in particular, is critically important, as it is the world’s largest consumer of commodities. Thus, changes in demand for it will impact prices. 

For a commodity-driven export economy, South Africa is heavily dependent on demand for these commodities for foreign exchange earnings and economic growth. 

Good news for South Africa

The good news in this regard is that the EU and China are proving resilient in the face of a looming trade war, boding well for demand for South African exports. 

Els said that these economies are broadly expected to perform better than the US economy in the coming years. 

This is partly due to cyclical factors in the EU, with interest rates being substantially lower than those seen in the United States. 

However, the bloc’s economic fundamentals appear to be improving as well, with significant infrastructure spending boosting the economy. 

Crucially, the largest EU economy, Germany, is expected to experience faster economic growth in the coming years as it increases government spending in the economy. 

Germany has a relatively strong balance sheet compared to other major economies, giving it substantial room to spend to boost its economy. 

In particular, the country has announced an increase in defence spending, which should boost local industry and potentially military exports. 

On the other hand, the Chinese economy appears to be more resilient than many expected in the face of a trade war with the United States. 

Els expects its economic growth to slow slightly throughout the rest of 2025, but still be close to the government’s 5% target. 

The Chinese government is also spending heavily in the local economy, and a significantly looser monetary policy should boost demand. 

Els explained that the stronger performance from these economies will shelter South Africa from the worst effects of US tariffs. 

However, the concern is that these economies may be impacted by a trade war with the United States, potentially lowering their demand for South African exports. 

In this case, any slowdown in China will be particularly impactful, with it having the potential to push South Africa into a vicious cycle of slowing economic growth and a weakening currency.