Shifting tides: The splintering US-SA relationship

By Casey Sprake

The expulsion of South Africa’s (SA) ambassador to the United States (US), Ebrahim Rasool, in mid-March marked a new low in the often contentious relationship between Pretoria and Washington. Triggered by Rasool’s public criticism of US President Donald Trump’s administration, the incident underscores the fragile nature of US–SA diplomatic ties.

Though economic cooperation has continued, particularly in trade, investment, and aid, longstanding ideological and geopolitical differences have frequently placed the two nations at odds on global issues.

This diplomatic flashpoint raises an important question (especially considering President Cyril Ramaphosa’s meeting with Trump at the White House this week): Will it lead to a lasting rupture or offer an opportunity to recalibrate the bilateral relationship, potentially leading to a more constructive and mutually beneficial future?

Central to answering this are three economic channels that tie SA to the US: trade, foreign investment, and aid. Understanding the dynamics of these linkages is crucial in evaluating the broader consequences of the current fallout.

Channel 1: Trade at a Crossroads

Trade is a vital component of SA’s relationship with the US. SA sends 9% of its exports to the US, a level on par with Brazil and China among BRICS countries. However, in terms of economic exposure, SA is less vulnerable than some others. Only 3.7% of its GDP is linked to US exports - well below Mexico’s 26% and comparable to the European Union (EU). This indicates that while trade disruption would be painful, it would not be devastating unless ties were completely severed- an unlikely scenario.

A crucial trade mechanism is the African Growth and Opportunity Act (Agoa), a US law enacted in 2000 that grants Sub-Saharan African countries duty-free access to US markets. While Agoa is of minor significance to the US economy, accounting for just 0.3% of its total imports, it is vital for many African nations.

About one-third of Agoa countries' exports to the US fall under the agreement. For SA, this figure stands at 25%. In 2023, SA was the second-largest Agoa exporter after Nigeria and the top exporter of non-oil products, with $3.6 billion in Agoa-eligible goods like vehicles, chemicals, citrus, jewellery, and yachts.

While the economic risk from total trade collapse is limited, the erosion or withdrawal of Agoa benefits would still have significant sectoral impacts. A hypothetical 25% US tariff on Agoa imports would raise just 0.2% of US federal revenue but would drastically undermine the competitiveness of SA exports, harming industries and employment at home.

Channel 2: Foreign Direct Investment and Portfolio Flows

While trade tariffs are a key pressure tactic, the US’s deeper leverage lies in its financial footprint in SA. In 2023, US investments—especially portfolio holdings—totalled nearly R2 trillion, or 29% of SA’s GDP, making it the largest investor. This far exceeds other nations and spans key sectors. Any diplomatic fallout risks destabilising SA’s capital markets, investor confidence, and broader economic stability.

Channel 3: Aid and Its Disruption

Of the $1bn in total aid SA received in 2022, nearly half came from the US. Much of this was funnelled through PEPFAR (President’s Emergency Plan for AIDS Relief), which has played a critical role in treating HIV/AIDS. On assuming office, Trump froze and later suspended all US aid to SA, including the $6.5bn PEPFAR allocation.

This abrupt halt has strained SA’s healthcare system. PEPFAR previously accounted for 17% of the annual HIV budget and provided ARVs to 5.5 million people. Its withdrawal has disrupted care, leaving patients without essential medication.

Experts warn that this could result in over 500 000 deaths over the next decade and reverse progress made in controlling the epidemic. Beyond health, the aid cut has broader socio-economic implications, increasing pressure on public finances and risking a resurgence of preventable diseases.

Deepening Tensions: Context and Consequences

Rasool’s expulsion must be viewed within a broader trend of escalating US pressure. Under Trump’s renewed presidency, Pretoria has faced accusations of supporting land seizures and Iran’s nuclear programme, the withdrawal of $1bn in Just Energy Transition Plan (JETP) funding, and public criticism from prominent American figures such as Elon Musk.

Moreover, sweeping new US tariffs have already begun to hit the local economy. According to IMF modelling, the tariffs are expected to shave 0.35 percentage points off GDP growth in 2025. Anchor has revised its growth forecast to just 1%—a projection that does not yet factor in further political instability from the Government of National Unity (GNU). A 30% US import tariff is now a major threat to SA’s export competitiveness and trade balance.

These economic headwinds are compounded by SA’s narrow export base and a stretched fiscal position. The risk of additional sanctions—either targeting specific sectors or individuals—adds to the uncertainty. Inflation could rise, real incomes could fall, and broader economic growth may slow further.

The US remains one of SA’s most important economic partners, both in terms of trade and aid. As diplomatic relations deteriorate, the risk of sustained economic damage grows. The fallout is already tangible: from disrupted health programmes to faltering export sectors and revised GDP forecasts. Further deterioration could shake financial markets, slow down investment, and deepen socio-economic challenges.

In navigating this tense landscape, SA faces a strategic imperative: to recalibrate its diplomatic posture, protect its economic interests, and avoid irreversible fallout. The long-term health of the relationship will depend not just on political rhetoric but on whether both sides can find common ground amid growing geopolitical and ideological divergence.

* Casey Sprake is an economist at Anchor Capital.

** The views expressed do not necessarily reflect the views of IOL or Independent Media.

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