Tariffs kick in, but ZAR is weathering the storm

Key points

• South Africa could not secure any meaningful concessions from the US, and the tariffs imposed were at the top end of expectations. This is a blow to the economy, and certain industries will be badly affected. Still, the outcome is hardly surprising given SA’s stance towards the US and its decision to move away from its non-aligned position as it strengthened ties with BRICs nations and the likes of Iran.
• Although the US has imposed tariffs on most countries worldwide, SA has been penalised more than most. Such decisions kill any hope of resurrecting AGOA or US aid flowing to the country. These are regrettable developments, but SA played a role in all of this and now bears its consequences. Overall, SA is in a fortunate position to weather the storm due to high commodity prices and attractive terms of trade, so the ultimate impact on the ZAR will be less perceptible than first thought.

Baseline view

The impact on the ZAR of these tariffs will be masked by the strong terms of trade SA enjoys with the rest of the world and the healthy trade surplus SA continues to generate. While that might change in the future as lower interest rates encourage consumption, for now, the ZAR will likely hold its own against a weakening USD.

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