US GDP undershot expectations last week, reflecting the first signs of ripple effects from President Trump’s tariff policy. Locally, Finance Minister Enoch Godongwana announced that the third tabling of the Budget would take place on Wednesday 21 May.
International Market Developments
Markets are keeping a close eye on possible trade talks between the US and its trading partners following comments from President Trump that some trade deals could be announced this week. China recently indicated that it is considering an offer to discuss Trump’s steep 145% levies. Trump has expanded his trade war to the cinema industry, announcing that he is planning a tariff of 100% on films produced abroad. He claims Hollywood is devastated by US filmmakers and studios working abroad.
The US Fed FOMC will meet this week and announce its rates decision on Wednesday. Rates are expected to remain on hold. The markets have lowered the number of cuts expected this year. Officials are likely to weigh the risks to inflation against the worsening economic outlook, as the Trump administration’s policies have created an environment of extreme uncertainty.
US GDP undershot expectations in Q1:25, contracting by 0.3% q/q (annualized), after having increased by 2.4% q/q (annualized) in Q4:24. This first contraction since 2022 was driven by a significant increase in pre-tariff imports and softer consumer spending in Q1:25. The data marks the first signs of ripple effects from President Trump’s tariff policy.
ECB Governing Council member Yannis Stournaras commented that the central bank is set to continue cutting interest rates. Stournaras however added that the ECB would assess all incoming economic data on a meeting-to-meeting basis. He highlighted current economic uncertainty as high, and added that, in such a situation, “you don’t take big steps or make big promises”. Stournaras also pointed out that a slowdown of inflation is expected because of the tariffs under the Trump administration. The central bank has cut its benchmark interest rate six times since June last year and is expected to cut again at the June policy meeting this year.
Local Market Developments
Locally, Finance Minister Enoch Godongwana announced that the third tabling of the Budget would take place on Wednesday 21 May 2025.
He noted that Treasury would focus on improving spending discipline across departments, improving both revenue collection and structural reform to stimulate investment and growth. The re-tabling will encompass a full legislative reset: the Fiscal Framework, Appropriation Bill, Division of Revenue Bill, and the previously tabled Rates and Monetary Amounts Bill will all be presented to Parliament for new approval.
Electricity Minister Dr Kgosientsho Ramokgopa commented that SA could avoid loadshedding this winter due to returning power units. The minister spoke at the G20 Energy Transitions Working Group in Cape Town and expressed that improved electricity generation and the return of key power units could mean a much more stable power supply this winter. He added that several big power units will be back online this winter. The minister highlighted that performance levels are not expected to dip below last year’s — and may even improve.