The AGOA hit will be small on GDP but heavy on jobs

The Trump administration's announcement of its intention to terminate South Africa's eligibility for the African Growth and Opportunity Act (Agoa), from 1 January 2027, is another setback for the country's trade relationship with the United States because it comes at a time when bilateral relations are under strain.

However, it is important to clarify that this does not mean an immediate suspension of the trade benefits. South Africa remains eligible for the programme until the proposed termination takes effect.

If the termination does indeed proceed, South Africa would be able to export to the US but on less favourable terms.

South African exporters would face additional most favoured nation tariffs of around 3.4%, on top of the tariffs imposed by the US administration. This would potentially make those products less competitive in the US market.

Historically, South Africa has been the largest beneficiary of the US programme, exporting approximately $1.7 billion (R28bn) worth of goods to the US under Agoa in 2025.

In terms of the broader economic impact, Agoa-related exports account for approximately 10% of South Africa's total exports to the US. However, when measured against South Africa's total exports globally, they account for only 1%.

This suggests that the direct impact on overall GDP will probably be relatively small. However, the impact on employment could be more significant, particularly in industries that are reliant on access to the US market. The automotive and agricultural sectors, among others, could face increased pressure on their competitiveness, with potential implications for production, investment and jobs.

Beyond the immediate trade impact, the decision introduces further uncertainty into South Africa's relationship with an important trading partner and investment partner. South Africa's trade ministry has reiterated that Washington remains an important trade and investment partner, while also indicating that the country will accelerate efforts to diversify its export market. However, finding alternative markets of comparable size and value is neither immediate nor costless.

This makes continued diplomatic engagement particularly important before the proposed termination date. Ultimately, while the direct impact on South Africa's overall economic growth might be relatively contained, the loss of preferential access represents another headwind for export competitiveness with potentially more significant consequences for businesses, workers and industries that rely on the US market.

Tshiamo Masike is an economist at Momentum Group