The rand and JSE showed resilience on Tuesday, with the former recovering from Monday’s lows and the latter gaining ground as markets settled, after their initial reaction to US President Donald Trump’s new tariffs.
On Monday, Trump announced that he would subject SA to 30% tariffs from August 1, having warned earlier in the day that he would impose a 10% tariff on BRICS nations.
The news caused the rand to slump 1.63% against the dollar on Monday, as investors feared that SA exports, particularly in metals and agriculture, could face mounting pressure.
However, the local currency staged a speedy recovery, and by 10.30am on Tuesday was trading at R17.7833, 0.7% firmer than the previous close.
Additionally, the JSE was largely unfazed by the news, with the all share index gaining 0.19% on Monday and 0.21% on Tuesday morning.
SA investors are hopeful that Trump may withdraw the tariffs in the coming weeks or postpone the deadline, as was the case with his “liberation day” levies.
The US president said in his announcement on Monday that negotiations would still remain open ahead of the deadline.
Additionally, Trump’s tariffs do not extend to SA’s platinum group metals (PGMs), gold, chrome and coal, which make up a significant portion of SA’s exports to the US.
As a result, SA mining shares were unaffected by the tariff announcement, with the JSE precious metals and mining index gaining 0.42% on Monday and continuing to rise on Tuesday morning.
Still, the news is a blow for SA. The US is the country’s second-largest trading partner and a key destination for SA’s vehicle and farming sectors, which enjoy duty-free access to the US market.
“Analysts warn a 10% hike in tariffs could significantly dent export competitiveness, especially as SA negotiates to shield key sectors like automobiles and citrus,” said TreasuryOne currency strategist Andre Cilliers.
Trump also announced tariffs on Malaysia, South Korea and Japan, which dealt a blow to other emerging markets. Reuters reported that most Latin American currencies weakened against the dollar on Monday as risk assets were sold off globally.
The Korean won and shares in South Korean electronics giant LG both slumped overnight.
In a letter addressed to Ramaphosa on Truth Social, Trump called the two country’s trade relationship “far from reciprocal”. Ramaphosa responded by arguing that the 30% tariff was “not an accurate representation of the available trade data”.
“While the tone has softened, the market remains wary as more tariff letters are expected to be sent out this week and inflation risks loom,” said Citadel Global director Bianca Botes.
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