This past week global markets were sent through an economic whirlwind as US President Donald Trump's 'Liberation Day' tariff chokehold engulfed the world.
Following Trump's sweeping announcement of wide spread tariffs for many nations, that was set to kick off on Wednesday, the White House announced last Monday that 50 countries approached the US to negotiate for better tariff deals.
As trade officials scrambled, China stood fast in a stance opposing Trump's announcements, and on Wednesday said it would impose its own tariff against US goods, setting it at 84%.
Later in the day, in a shocking announcement, Trump said that 75 countries had stepped forward with intentions of negotiating for better tariff deals, and placed a three month pause on the tariffs he announced the previous week, but hit back at China, raising tariffs for the Asian nation.
The US President doubled down on China's tariffs and announced a 125% immediate tariff on the Asian nation.
Frank Blackmore, Lead Economist at KPMG, said that a lot of analysts had assumed the pause was going to be the case in terms of the tariffs being a negotiating tool.
Blackmore told Business Report, "Trump has used similar tactics in the past. However, there's obviously a lot of uncertainty surrounding decisions made by the Trump administration on whether the implementation of the tariffs announced would have been done or if they would have been a pullback as we've seen recently to allow countries to get around the table and negotiate better deals."
Blackmore added that the consequences of the announcement of the original tariffs were part of the reason for the decision to pull back to some of these implications of the tariffs for most countries.
"With the S&P 500 having declined around 17%, and the tech heavy NASDAQ more than 20% in correction territory, also the beginning of a number of dissenting voices within the United States, including from his own party. What the future will bring; I assume now countries will negotiate with the United States, and hopefully South Africa can also get around the table to try and secure a more favorable outcome than it feels like we have currently. This includes, perhaps, the future of AGOA. I think these are vital, given the fact that the tariffs would create a lot more harm to developing economies such as ours, given the fact that we are in a tight fiscal space, meaning government would not be able to substitute a decrease in private sector spending in order to keep the economy going," Blackmore said.
"Secondly, there are some sectors that are quite heavily exposed to the US economy including a number of American companies that produce in South Africa and export back to the US. I see this 90 days as a period of uncertainty, I don't think we will see markets reacting fully or recovering fully from where they were due to the uncertainty of what will happen over this period of time, as well as after the 90 days is finalised. There will be a general wait-and-see pattern that will rely on the difficult negotiations with the US in terms of a tariff deal," Blackmore further said.
Trump tariffs: the only certainty is uncertainty
Harry Scherzer, Actuary and CEO Future Forex, said that uncertainty surrounding potential US trade tariffs have created significant volatility in global markets.
"Businesses in South Africa feared an additional 30% tariff on a range of products as part of Trump’s broader strategy to reduce trade tariffs. Effectively, this would have meant, for example, that a $1 million shipment would incur $300,000 in import tariffs," Scherzer said.
"The S&P 500 climbed 5.6%, and the Nasdaq jumped over 8% following Trump's pause announcement. There’s much uncertainty and the fallout is likely to continue to influence indexes and currencies worldwide," Scherzer added.
Despite the uncertainty, there has been a silver lining with many South African commodities being were previously exempted from the tariffs.
"Mining stocks have seen record performance, boosted by a surge in gold prices – up 19% since the beginning of the year. Despite this, businesses must remain vigilant, regularly assessing their international money transfer providers to ensure they’re getting the best possible deal amid shifting economic conditions," Scherzer said.
Time for SA and other nations to take advantage of pause
NWU Business School economist Prof Raymond Parsons said, "The unexpected decision by President Trump of a 90-day suspension of reciprocal US tariffs on non-retaliatory countries pending further negotiations has prompted a strong rebound in financial markets and a modification of previous gloomy economic forecasts. The decision now creates a welcome window of opportunity for many countries to negotiate with the US for lower tariffs, including by South Africa.
"SA, which has so far taken a careful and pragmatic stance on US tariffs, must now also seize the moment in a transactional manner to broker a better tariff deal in its trade flows with the US. For the automotive and agriculture sectors in particular there is much at stake for SA to use the 90-day period to seek to ameliorate the negative impact of high US tariffs on theirexports to that country. SA’s negotiation stance should be based on the likelihood that AGOAwill not be renewed. The probable pain of non-renewal or exclusion must be built into SA’s strategy," Parsons added.
BUSINESS REPORT