Agoa Exit: No national crisis, just localised casualties - IOL
The withdrawal of Agoa benefits will increase the tariff burden by stacking Most-Favoured-Nation (MFN) duties on top of existing reciprocal tariffs introduced in April 2025, pushing combined effective tariffs to around 15.9% for some goods.
WHILE the headlines surrounding the US decision to remove South Africa and Rwanda from the African Growth and Opportunity Act (Agoa) suggest a major crisis, experts argue the fallout will be a localised setback rather than a national supply chain crisis.
Following a US Trade Representative review citing trade barriers, corruption concerns, and practices inconsistent with US national security, the White House announced the termination of South Africa and Rwanda’s eligibility effective 1 January 2027.
Despite South Africa historically being the largest beneficiary, accounting for about 54% of all Agoa-related exports since the programme’s inception, the immediate financial market reaction has been muted as investors anticipated the move amid deteriorating diplomatic relations.
Highlighting the limited macroeconomic reality, Dr Ernest van Biljon, Dean of Research at the IMM Graduate School, explained: “Our exposure is smaller than the headlines suggest, but that does not mean there is no cost.”
Echoing this sentiment, Dr Lerato Ntuli, an economist at Anchor Capital, noted: “The direct economic impact is likely to be relatively contained, given South Africa’s limited overall dependence on the US export market.”
South African Reserve Bank (Sarb) data supports this, showing the US absorbs only between 7% and 8% of South Africa’s total global merchandise exports, with bilateral US trade at $24.1 billion compared to $55.6bn with China.
Furthermore, the Brookings Institution estimates that losing Agoa alone would cut overall US exports by just 2.7% and GDP by a mere 0.06%.
However, the withdrawal of Agoa benefits will increase the tariff burden by stacking Most-Favoured-Nation (MFN) duties on top of existing reciprocal tariffs introduced in April 2025, pushing combined effective tariffs to around 15.9% for some goods.
This financial pain will be highly concentrated. Although automotive products make up 64% of Agoa exports, the US only accounts for 10.7% of that volume.
Conversely, the US takes 70% of South Africa’s agricultural exports under the agreement, and phytosanitary rules restrict these American-bound exports to specific regions, heavily impacting local growers, packhouses, transporters, and seasonal workers.
Highlighting this localised vulnerability, van Biljon warns: “A national percentage of a fraction can hide a very local problem.”
Ntuli adds that the burden will fall heavily on specific industries unable to pass costs onto American consumers without losing market share: “The impact is therefore likely to be concentrated in those sectors where MFN tariffs are materially higher than average and where exporters are particularly reliant on preferential market access,” specifically highlighting automotive components, citrus, wine, jewellery, and ferroalloys.
Despite these looming tariff hikes, local exporters have already proven their ability to adapt to a restrictive trade environment. Agricultural shipments faced reciprocal tariffs of approximately 30% in 2025, yet volumes only dipped 3% to about $504 million.
Pointing to the strength of these established trade flows, Ntuli observed: “This suggests that strong product demand, established supply chains, and limited substitution options can partially offset the impact of higher tariffs.”
Furthermore, businesses have spent the past two years mitigating this risk by diversifying into Europe, where trade grew 44% over five years, and capitalizing on China’s zero-tariff treatment for 53 African countries.
Reflecting on this strategic pivot away from reliance on a single agreement, van Biljon observed: “Agoa was a useful advantage, not the foundation of South Africa’s trade.”
To survive the transition, supply chain managers are being urged to map their product-level exposure, price in the new tariffs before the January deadline, and build resilience through alternative logistics partners and buffer stocks.
With tariff shifts, shipping route closures, and geopolitical shocks now compounding one another, van Biljon points out that these overlapping crises "increasingly look like the normal operating environment rather than exceptions”. He said: "Firms that know their exposure and have somewhere else to sell will manage best.”
Ultimately, while some export sectors will face a more challenging operating environment, the aggregate economic impact is likely to be modest.
Summarising the broader strategic outlook, Ntuli said: “The longer-term significance is likely to depend less on the immediate tariff increase and more on whether the suspension marks a further deterioration in bilateral trade and investment relations between South Africa and the US.”
