Thirty percent tariffs went into effect on August 7th on most goods headed to the US. This is the highest in all of Africa and adds another layer to American and South African relations, following the expulsion of Ambassador Ebrahim Rasool from Washington DC in March, disagreements over stances on the Middle East, and US suggestions that South Africa end its BBEE racial empowerment act. While these new tariffs are set to affect primarily the agricultural and automotive industries, there is significant room in Washington’s new economic policy for South Africa to advance its interests, economy, and influence — especially in sub-Saharan Africa.
The US is South Africa’s second-largest export market, comprising 7.5% of total goods exports. 48.7% of these are minerals and metals. Exemptions are granted to over 1000 tariff lines, including energy products and raw materials, wood-based products, pharmaceuticals, and metallic minerals and precious minerals. These exempted products account for 36% of aggregate exports to the US, 80% of which is platinum, rhodium, palladium, and gold bullion. It is important to recognize that this leaves only 5% of aggregate South African exports susceptible to new US tariffs, or only 64% of trade to the US.
With the upcoming expiration of the African Growth and Opportunity Act (AGOA), the preferential trade agreement which has offered duty-free access to US markets since 2000, South African exports will face even stiffer competition in the US market, with fruits, vegetables, chemicals, and boats being hit especially hard. South Africa has responded with a request for continued preferential treatment in some of these areas, including automotive exports, which have a 98% AGOA preference utilisation. Considering that a trade-matters template is still outstanding, the implementation of full tariff measures may yet be postponed, allowing for continued negotiations.
New trade negotiations also shine a light on renewed intra-African trade, as echoed by President Ramaphosa recently. Ramaphosa believes it is time to expand intra-African trade, with a long-term goal of an African free trade area. He also established a support desk in order to help businesses navigate away from US trade and find other markets. These alternatives will be crucial for the automotive and agricultural sectors; however, significant opportunities still remain within the current US–South Africa trade relationship. Platinum group metals (PGM), for example, are the biggest export to the US, and are some of the critical minerals underpinning many defence, renewable energy and AI-based systems. These critical minerals, which are essential to the new technological revolution, are exempt from the 30% tariffs and will be enormously useful to South Africa in its trade negotiations with Washington, as well as establishing a more robust African mining market.
It is precisely Africa’s wealth of critical minerals that makes the Trump administration so bullish on the continent. Africa holds vast deposits of rare earths, gold, cobalt, copper, and gallium, among others.
The President’s interest in Africa has taken a practical approach — he brokered a peace deal between the Democratic Republic of the Congo (DRC) and Rwanda in late June and reaffirmed development projects like the $4 billion Lobito Corridor initiative. Indeed, US influence is set to stay in Africa even if it now takes a much simpler, ‘trade, not aid’ approach. As South Africa seeks to both expand in alternative markets and grow its influence on the continent, it must account for Washington’s new-found interest in Africa. A strong shift to China, for example, could worsen relations with the US.
US entities are already preparing for the American economic transition away from reliance on China, with critical minerals being a key topic of concern. Kobold Metals, in mid-July, for instance, made a deal with the DRC government to acquire the Manono lithium deposits and perform extensive critical minerals exploration. The US arm of global commodities firm BGN International has also stepped in to streamline trade within the DRC. The unique deal will centralize exports, overcome old-fashioned mining operations, and improve distribution channels, helping encourage a responsible and valuable mining boom across Africa. BGN International’s initiative may offer South Africa an interesting model for African trade harmonization, a stated goal of President Ramaphosa. US-linked entities and operations on the continent could attract the valuable support of US government agencies. The $500 million loan package from the US Development Finance Corporation has also gone a long way to expand facilities and infrastructure in the Lobito Corridor, most critically with the Lobito Atlantic Railway. South Africa has been a major proponent of the Corridor in its current role as G20 president.
Considering that the Lobito Corridor and the DRC’s ‘Critical Minerals for Security and Peace Deal’ are reshaping regional trade dynamics in southern Africa and are expected to be key in providing critical minerals for global growth in the future, South Africa should use its own export dominance in PGMs and other critical minerals to leverage better trade outcomes and greater African unity. South Africa will gain from the US’s new economic emphasis on regional stability. Trump and Ramaphosa also align on trade harmonisation agendas. Creating more consistent trade practices across Africa will bring the continent much closer to the possibility of an African free trade area.
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The US-brokered peace deal is a step in the right direction for the DRC and the region. A full deal is expected on August 17th and will likely expand access for US mining companies. South Africa will also gain both economically and geopolitically from the deal, and can comfortably watch from the sidelines while learning from Washington’s initial critical minerals foray in Africa. Pretoria is America’s largest African trading partner and will maintain its strategic importance to the US — over 600 US businesses operate in South Africa. A bilateral tax treaty and the Trade and Investment Framework Agreement also secure several key minerals for the US, namely chromium, manganese, and titanium. The Trump administration seeks continued access to these resources despite its trade overhaul.
Ultimately, while tariffs certainly carry risks to some sectors, the overall impact may be contained, with South Africa poised to gain with the right strategic responses. While critical minerals can serve as leverage in deal-making with the US, if leveraged correctly they can also catalyse greater economic unity across the African continent.
