Tariffs, turmoil and trade-offs
South African investors have been hit by a double whammy of geopolitical and domestic political uncertainty. Neither is good, but before making rash decisions, perspective is necessary. Let’s start with a global view. US President Donald Trump’s “liberation day” announcement of sweeping new import tariffs was much worse than investors expected. The expectation was that tariffs would be reciprocal to broadly match what other countries charge for imports from the US. Instead, it appears to be driven by a formula that has little grounding in economic theory or trade realities (no need to get into the details). For instance, South Africa’s average duty on American imports is 7%, but the US tariff on South African imports jumped to a staggering 30%. Sixty countries will be hit by these tariffs, which Trump still terms “reciprocal”, though they clearly go far beyond what these countries charge the US. The remaining countries will be hit by a 10% tariff, including Australia, Brazil and the UK. Canada and Mexico were spared new tariffs, but previously announced import duties, including those on steel, aluminium and vehicles, remain in force.