South Africa's steel and aluminium sectors brace for impact as US doubles tariff charges
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South Africa must adapt to new challenges as US President Donald Trump announced a fresh round of import tariff hikes of up to 50% on steel and aluminium this week, compounding the effects of April's 25% increase, according to stakeholders and analysts.
The local sector is still grappling with disrupted global supply chains, rising manufacturing costs, and reduced competitiveness for South African automotive products in the US market.
Many South African businesses are now exploring alternative markets in Africa, Asia, Europe, and the Middle East to reduce reliance on the US. The announcement came as South Africa and other countries trading with the US benefited from a 90-day tariff suspension beyond the 10% base tariff, providing a window for strategic negotiations to safeguard key exports and explore new trade avenues during a recent meeting between President Cyril Ramaphosa and his US counterpart.
Friday's decision to raise tariffs on imported steel and aluminium from 25% to 50% escalates Trump's global trade war, coming hours after he accused China of violating an agreement to mutually roll back levies and trade restrictions on critical minerals. The European Commission responded on Saturday, signaling readiness to retaliate against the US plan, raising the prospect of an escalating trade conflict between major economic powers.
Donald MacKay, the founder and CEO of XA Global Trade Advisors, noted that while South Africa's steel exports to the US are limited, the impact will still be felt. 'Aluminium is exported in far greater volumes, but the US has limited aluminium production, so prices will likely rise. This isn't good, but it's not devastating either,' MacKay said.
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South Africa's aluminium sector had previously been exempted from emergency tariff decisions due to the commodity's scarcity status.
Muzi Manzini, the CEO of the Aluminium Federation of South Africa, expressed optimism about a potential deal involving South Africa purchasing US liquefied natural gas for a minimum of 10 years in exchange for steel and aluminium tariff exemptions.
'Unless we're back to the US's haphazard tariff policy, the trade court's ruling that the President lacks authority to impose tariffs may hold, despite the appeal. If this stifles Trump's tariff plans, we could revert to rules-based World Trade Organisation processes,' Manzini said.
According to a PricewaterhouseCoopers (PwC) report, US Tariffs vs South Africa: A New Economic Era?, published on Friday, the tariffs have disrupted trade volumes and supply chains, reducing South African exports to the US due to higher costs. In response, businesses are leveraging the African Continental Free Trade Area (AfCFTA) agreement to boost intra-African trade and regional economic integration while prioritizing the transformation of raw materials into higher-value finished goods to mitigate tariff exposure and drive innovation.
The report highlights that the tariffs will likely impact key export sectors, particularly agriculture and automotive, which are critical for revenue and youth employment. As the US is South Africa's second-largest bilateral trading partner, these changes could lead to reduced exports, lower selling prices to offset higher US landed costs, and potential job losses as US buyers turn to alternative sources.
Despite these challenges, PwC notes that free trade agreements like the African Growth and Opportunity Act (Agoa) and AfCFTA offer significant opportunities. 'Although Agoa's future remains uncertain, it continues to be a valuable tool for South African exporters to maintain competitiveness in the US market,' the report stated.
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