It’s a quiet week on the domestic economic front — except for Friday, when the US is expected to impose a wave of reciprocal tariffs on several countries, including SA. The move includes a steep 30% duty on SA exports.
Negotiations are continuing, with SA still hoping to secure a more favourable outcome before the deadline.
While less than 8% of SA’s exports go to the US, certain sectors — including motor vehicles, citrus, wine, leather, nuts, ship and boatbuilding, floating structures, aluminium, art and antiques — face outsize consequences from the proposed tariffs.
Markets may see more “knee-jerk reactions” when the tariffs kick in at the end of the working week. But Old Mutual chief economist Johann Els says the fallout is likely to be temporary. “Markets have for some time priced in the impact of the tariff war,” he said.
According to KPMG lead economist Frank Blackmore, it will take some time before the market gets to grips with the effects of tariffs.
“As this occurs, one would expect a flight to safety, meaning that money and investment will flow out of emerging and developing markets, including SA, to developed markets, having a negative impact on exchange rates over the near term,” he said.
However, as policy clarity emerges, Blackmore expects the focus to shift to inflationary consequences in the US and their knock-on effects on growth and employment.
“Over the longer term, there will be a shift away from reliance on the US as a result of the recent uncertainty, and the costs of this exposure [will] add up,” he said.
Blackmore estimates the direct GDP impact for SA could be in the region of 0.2 percentage points, though final trade volumes with the US remain uncertain.
“Indirectly, the global impact of broad tariffs will also have an impact on economic activity. Trade balance and employment effects are less clear in terms of sizing but will be negatively impacted,” he added.
Els, meanwhile, expects the effect on the trade balance to be minimal but acknowledged that specific industries could experience employment losses. “The price effect will impact volumes, but volumes will not fall to zero overnight,” he said.
Despite these risks, neither economist foresees a significant dent in investor confidence, as most other countries are similarly impacted, “and investment is determined by other underlying political and economic issues, policies, costs and so on”, Blackmore added.
The JSE fell the most since June 13 in intraday trade on Friday as investors reacted nervously to the expiration of a key deadline to avert a new US tariff on SA exports. The long-threatened 30% tariff caused a broad sell-off, with most indices falling more than 1% by midmorning.
The banking sector was the worst performer on the local bourse on Friday, down 1.89%, with financials not far behind.
While the tariffs are a concern, Business Unity SA (Busa) found the delay in finalising a framework agreement between the SA and US governments “particularly troubling”.
“Countries such as the UK, Japan, Pakistan, South Korea, the Philippines and Indonesia, as well as regional blocs like the EU, have successfully negotiated trade deals with the US that resulted in the reduction of the original 30% tariffs,” Busa said in a statement.
“We view this as a pivotal moment for SA’s trade strategy,” Busa CEO Khulekani Mathe said. “The tariff changes signal a strategic inflection point. We must continue to engage the US administration on existing access while building new capabilities, new markets and a more resilient trade architecture.”
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