Trump, tariffs and your troubles with the tariff missiles: What consumers need to know

Following the uncertainty around the National Budget and the US administration’s now-paused plan to hike tariffs on South African exports to 30%, many South Africans are still feeling uneasy. While markets have reacted strongly, little attention has been paid to how these tariffs could affect consumers at home. Yet according to John Manyike, Head of Financial Education at Old Mutual, the consequences could be more significant than expected.

The decision by the United States to impose a 30% tariff on South African exports is likely to have a ripple effect on the country’s trade dynamics. This move effectively nullifies the benefits previously enjoyed under the African Growth and Opportunity Act (AGOA), which had provided duty-free access to the US market for many South African goods.

“While the bulk of our exports to the US are precious and base metals which are largely exempt from tariffs, the industries which are most likely to be affected are the agricultural and automotive industries, which are big exporters to the US and employ one million people in South Africa,” explains Manyike. “If these industries come under pressure, it could result in job losses due to reduced export revenue and a decline in profitability.”

Impact on inflation and the rand

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Moreover, the recent fall-out between the DA and the ANC in the Government of National Unity has led to rand weakness. “A weaker currency makes imported goods more expensive for consumers,” explains Manyike. “This has led to predictions of a sluggish SA economy this year due to poor sentiment globally and the very real possibility of a US recession.”

He believes the hike in tariffs could influence domestic inflation and consumption. “Despite the lower oil price, household incomes are likely to grow at a slower pace than inflation, which will increasingly erode consumers’ capacity to consume,” he says.

Keep calm and stick to your financial plan

The good news is that South Africa’s main trading partners, China and Europe, are expected to have a more accommodative trade stance, which will cushion the blow of the US tariff hikes. Even so, consumers should still be conservative, cautions Manyike.

Despite the prevailing uncertainty, Manyike recommends sticking to your financial plan. “There are a number of things you can do to build resilience,” he says. These are steps Manyike recommends:

• Adjust your budget to account for rising prices and focus on essential expenses.
• Start or maintain an emergency fund, even if you can only contribute small amounts per month.
• Use loyalty and rewards programmes to build up some sort of emergency fund for your relief in tough seasons
• Reduce your exposure to debt, especially high interest credit such as store cards and credit cards. Use credit prudently.
• Shop smarter by comparing prices and explore alternative, affordable brands.
• Stay informed and be proactive, rather than acting out of fear.
• Live within your means

“Even in tough economic conditions financial resilience is possible with the right strategies in place,” concludes Manyike.