The South African rand continued its downward trend against the US dollar after Donald Trump’s Liberation Day speech on Wednesday. The USD/ZAR exchange rate rose to a high of 18.97 on Thursday, its highest level since February 3. It has jumped by over 4.7% from the lowest point this year.
US and South African trade concerns
Donald Trump announced that the US will impose huge tariffs on imported goods from South Africa when he delivered his closely-watched Liberation Day speech,
Trump noted that South Africa charges a 60% tariff on South African goods. As a result, the US will impose a universal 30% tariff on goods coming from the country.
These tariffs will have a big impact on trade flows between the two countries since South Africa is bound to respond.
Data shows that the trade volume between South Africa and the US totaled about $20.5 billion in 2024. The US exported goods worth over $5.8 billion, while South Africa sold products worth $14.7 billion. This means that the US had a trade deficit of about $9 billion.
The top South African exports to the US are platinum, cars, and other precious metals. In this case, the country will continue shipping its platinum and other precious metals to the US because of its big role in the industry. It is hard to replace the country’s platinum.
The products that could be impacted are the Mercedes-Benz C-Class, which is assembled in East London, and BMW X3, which is made in Pretoria. There is a risk that the auto sector will be impacted as the vehicles become unaffordable once a 25% tariff is added.
US and South Africa tensions have risen
The new tariffs add on the tensions that have been going on since Trump became president. His administration has accused South Africa of targeting white people because of a land bill that the parliament passed.
This bill will enable the government to take over underutilized land and pay a fair market price. It was a better bill than most activists advocated, which called for taking the land without payments.
Trump has also slashed some funding to South Africa when it cut the USAID budget. That move halted about $440 million in aid allocated in 2023 and another $439 million allocated this year.
Therefore, the USD/ZAR pair has soared as analysts expect that the South African Central Bank will slash interest rates further even as inflation rises. The most recent data showed that the country’s inflation jumped to 3.2% from a low of 2.4% last year.
USD/ZAR technical analysis
USDZAR chart by TradingView
The daily chart shows that the USD/ZAR pair surged, as we predicted in this article. It moved to a high of 18.97, its highest level since February 3rd. This rebound happened after the pair formed a falling wedge pattern, a popular bullish continuation sign. This pennant came after the pair surged, meaning that it was part of a bullish pennant pattern.
The USD to ZAR exchange rate has remained above the 50-day and 100-day moving averages. Also, the Relative Strength Index (RSI) and the MACD indicators have all pointed upwards.
Therefore, the pair will likely keep rising as bulls target the next key resistance level at 19.21, its highest point this year.
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