The United States government’s 25% import tariff on cars and key vehicle parts is another blow to the already-besieged South African automotive manufacturing industry.
President Donald Trump imposed the tariff through the signing of a proclamation on 26 March 2025, invoking Section 232 of the US Trade Expansion Act of 1962.
The White House has argued that the tariff is necessary to address a “critical threat” to US national security and that the move would protect the country’s automobile industry.
Trump’s administration maintains that excessive vehicle and vehicle part imports have threatened the US’s domestic industrial base and supply chains.
“In 1985, American-owned facilities in the United States manufactured 11 million automobiles, representing 97% of overall domestic (American- and foreign-owned) production of automobiles,” the White House said in a statement.
“In 2024, Americans bought approximately 16 million cars, SUVs, and light trucks, and 50% of these vehicles were imports.”
“Of the other eight million vehicles assembled in America and not imported, the average domestic content is conservatively estimated at only 50% and is likely closer to 40%.”
“Therefore, of the 16 million cars bought by Americans, only 25% of the vehicle content can be categorised as Made in America.”
The administration argues these changes have impacted automotive parts manufacturing jobs, which declined 34% from 839,300 in 2000 to 553,300 in 2024.
Carmakers have largely criticised the impact the tariffs will have on vehicle affordability for US consumers, including on cars made in that country.
Experts argue the tariff is likely to override protections afforded to South African carmakers trading with the US as stipulated in the African Growth & Opportunity Act (Agoa).
In South Africa, the automotive industry and food and beverage sectors are the biggest beneficiaries of the special trade agreement.
According to the National Association of Automobile Manufacturers of South Africa (Naamsa), the US is the country’s third-largest export market.
25,553 of the 390,884 vehicles exported out of the country in 2024 were sent to the US, working out to about 6.5% of the total.
However, South Africa also exports vehicle components to the US, including some which the tariff will impact.
Mercedes-Benz, which operates a plant in East London, is among the companies exporting left-hand drive models to the US.
BMW had also planned to start exporting new X3 models to the US in 2026.
Naamsa told Business Times it needed government to help mitigate against the impact and was in discussion with policymakers to preserve Agoa benefits and explore alternative trade pathways.
“The South African automotive industry has built a strong export relationship with the US, particularly in the supply of light vehicles and automotive components,” said Naamsa chief economist Paulina Mamogobo.
“Any potential disruption to trade flows will require close collaboration between industry and government to ensure the continued competitiveness of South Africa as a global automotive manufacturing hub.”
It should be noted that South Africa also imposes a 25% import duty on all vehicles from countries other than the European Union (EU), for which a reciprocal 18% tariff applies, as a measure to protect its own manufacturing industry.
A perform storm of problems
Local carmakers are already facing significant headwinds on three other fronts — local component availability, increased competition from India and China, and a delayed change in vehicle assembly equipment to meet changing export market demands.
ArcelorMittal is shutting down its Newcastle and Vereeniging mills, which produce long steel for various vehicle components, including engine and structural parts.
The company said the facilities are unviable because of increasing electricity prices, a surge in cheaper imported products, unreliable rail services, and government-supported discounts on scrap metal provided to smaller local companies.
The Industrial Development Corporation — which currently holds an 8.2% stake in the company — is currently considering taking control of the company through an increased stake.
It has already effectively bailed out the company on two occasions, most recently in early 2025.
Automakers have warned that the closures will have a devastating impact and result in extended production lead times and increased manufacturing costs.
In addition to hurting the greater local manufacturing value chain, the shutdowns will leave about 3,500 people working at the mills jobless.
Even if an agreement were reached and the steel mills remained open, South African carmakers are finding it increasingly difficult to compete with imported vehicles from India and China in the current business environment.
India’s cars are dominating the budget market while China’s are eating into the sales shares of the German giants, three of which have production facilities in South Africa.
Reflecting the decline in demand for locally-made cars, South African plants produced 515,712 units in 2024, down 19.4% from the 640,000 manufactured in 2019.
In addition to the increased competition on the local front, exports of locally made vehicles are also under threat due to the industry’s slow transition to new-energy vehicle (NEV) manufacturing.
Several of South Africa’s major export customers, including the European Union, are planning to completely ban the sale of fuel-powered cars in the next decade.
No major carmaker in the country currently produces fully electric models, and government tax incentives for NEV production will only take effect next year.