Determining the economic effects of a potential SACU-US free trade agreement: A CGE analysis

Escalating tariff tensions have recently disrupted global trade dynamics. President Trump's reciprocal tariffs, together with the expiration of African Growth and Opportunity Act (AGOA), signal a significant shift in market access conditions for exports from the South African Customs Union (SACU) to the United States. This paper examines the economic effects of a potential Free Trade Agreement (FTA) between SACU and the United States (US) using a dynamic computable general equilibrium (CGE) model, considering the post-AGOA landscape and 2025 reciprocal tariff developments. The results show that an FTA would raise GDP, industry output, and bilateral trade with the US, although these gains diminish over time. The impact varies across industries, reflecting differences in initial tariff levels and export orientation. The FTA is mildly trade-creating, with minimal trade diversion. Policy recommendations include phased tariff reductions aligned with SACU's export strengths, particularly in AGOA-affected sectors such as vehicles, chemicals, and agriculture. Negotiations should prioritise strengthening SACU-based regional value chains and enhancing export competitiveness to sustain the benefits of the FTA and promote long-term economic resilience.