A major tariff hike announced by the United States — being called “Liberation Day” — has caused waves in global markets. With most countries and products facing steep new taxes, it’s one of the biggest tax increases by the U.S. in recent history and could affect how people spend, how businesses trade, and how the global economy performs.

Johann Els, Group Chief Economist at Old Mutual, has shared insights on what this could mean — especially for South Africa.

Don’t Panic – Stay the Course

“While this move may cause some short-term uncertainty and even push up prices, we believe it’s important for South Africans to stay calm and stick to their financial plans,” says Els.

He notes that although these tariffs may increase inflation in the US for a short while, the bigger picture shows weaker global demand, which could actually help reduce inflation overall. This may encourage the U.S. Federal Reserve to start cutting interest rates later this year — possibly by as much as 1.25 percentage points.

Limited Direct Impact on SA

For South Africa, the direct impact is expected to be small. “We don’t trade heavily with the U.S. compared to other regions,” says Els. “Precious metals and cars are our main exports there — and many of these are not affected by the new 31% tariff. So while some sectors like agriculture and vehicle manufacturing may feel some pressure, the overall economy should remain relatively stable.”

No Local Recession Expected

Els has slightly lowered South Africa’s economic growth forecast due to softer U.S. demand but doesn’t expect a recession here. “China and the Euro Area — our biggest trading partners — are expected to support their economies, which should help keep ours going too,” he says. “Also, with inflation looking more stable and possibly even dropping below 3% in the second quarter, the South African Reserve Bank could start cutting interest rates from mid-year.”

Political Stability Still Key

Els adds that political stability is still important for investor confidence. “The Government of National Unity (GNU) showed early signs of promise, but uncertainty around the DA’s continued participation could hurt confidence. We hope that cool heads prevail to ensure stability and progress.”