South African investors are grappling with fresh tariff threats from the Trump administration after the recent executive order to freeze all aid to the country.
International Market Developments
Last week was all about tariffs. President Trump began the week by announcing tariffs on Canada, Mexico and China, subsequently deferring the former two for one month in response to concessions made over migration and fentanyl. Markets will be watching developments on trade and tariffs very closely over the coming days.
The economic landscape of South Africa was dramatically altered by U.S. President Donald Trump’s executive order to freeze all aid to the country, citing concerns over land expropriation laws and South Africa’s stance regarding the Middle East. In addition, Trump’s planned imposition of a 25% tariff on steel and aluminum imports could further impact South Africa
US Fed Chair Jerome Powell is scheduled to deliver his semi-annual monetary policy testimony to the Senate Banking Committee this week. Last week, both the ECB and the Fed highlighted the uncertainty, noting how difficult it is to factor the US trade policy into their outlooks. The Bank of England did not include the latest developments in its updated projections.
The January US CPI will be in focus this week (Wednesday) with market consensus at 2.9% y/y, matching December’s print.
Local Market Developments
Post-SONA, the South African Rand (ZAR) saw an appreciation from 18.55 to 18.32 against the USD, reflecting a market confidence boost from the announced reforms. However, this optimism was short-lived following Trump’s announcement to freeze all aid to the country.
The U.S. provided around $440 million in aid to South Africa in 2023, with $400 million, aimed at combating HIV/AIDS. The cessation of this aid could create a funding gap of up to 17% in South Africa’s HIV/AIDS program, requiring additional funding to be found from elsewhere.
This week, domestic interest will focus on the monthly GDP figures for December which are due to be published on Thursday.