President Donald Trump's recent tariff decisions could reshape global trade dynamics, with significant implications for South Africa's economy.
Image: Peter Zay / AFP
US President Donald Trump has delayed the start of tariffs on Mexico and Canada for a month but said that China remained in the firing line for levies that are putting the global economy on edge.
The US leader has sent shock waves through the international markets and Trump’s actions could lead to disruptions in global trade, reshape supply chains, and send investors scrambling to reassess their strategies.
Casey Sprake, an investment analyst at Anchor Capital said that Trump hopes to use the tariffs as a bargaining tool. Despite the market expectations and ramifications, his administration appears committed to implementing them.
“The key question now is whether this is a strategy to "escalate to de-escalate" in future negotiations or if tariffs are a long-term policy shift. Either way, the measures are more aggressive than anticipated, likely driving inflation within the US and potentially abroad, while also dampening GDP growth,” she explained.
Sprake said that it was not a surprise to see that the financial markets have reacted negatively to the announcement.
She added that South African markets in particular are under pressure, with the JSE trading down 1.3% and government bonds tumbling, signalling investor unease amid rising geopolitical risks.
The rand weakened on Monday morning after Trump said that South Africa was "confiscating" land and "treating certain classes of people very badly". The US leader also said that he would cut off all future funding to the country.
On Friday the rand was trading at around R18.64 at the close of business but by 8:30am on Monday the rand had lost ground and was trading at around R18.95 to the dollar.
On Tuesday the rand was trading at around R18,80 at 8am to the dollar.
Sprake said that Trump’s second term was always expected to intensify US-SA tensions, with concerns over the African Growth and Opportunity Act (AGOA) eligibility, potential cuts to the US President's Emergency Plan for Aids Relief (Pepfar) funding, and a broader review of diplomatic and economic ties.
She said that the US is wary of South Africa’s growing alignment with Russia, China, and Iran, leading to scrutiny from US lawmakers.
“However, South Africa’s role as G20 president and President Ramaphosa’s diplomatic skills could help mitigate risks. Key sectors vulnerable to potential US policy shifts include automotive and agriculture (linked to AGOA), as well as industries reliant on aid,” she added.
Sprake said that looking ahead, managing relations with the US while leveraging opportunities from China’s expanding influence will be crucial.
“Investors should brace for uncertainty, but strategic diplomacy and economic diversification could soften the blow. One thing is for certain, volatility will be the name of the game ahead,” she concluded.
IOL BUSINESS
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