The US and China have made a tentative trade agreement this week that will hopefully mark an easing of the tensions between the world’s two largest economies. But while US President Donald Trump hailed the deal as “DONE” on social media, markets, analysts and China itself have taken a more cautious view.
The agreement is a loosely defined framework based on verbal commitments and diplomatic gestures rather than a formal, enforceable treaty. Under the terms of the deal, China will resume the flow of critical rare earth metals to the US, which are essential for sectors ranging from defence to electric vehicles.
The US, in return, will begin lifting certain technology export restrictions and consider easing student visa curbs. While these concessions offer some relief from the tit-for-tat tariff escalations that have rattled markets since Trump returned to office, many trade barriers and tariffs will remain firmly in place.
Trump said on social media that China will face a 55% charge, a figure that seems to include levies introduced during his first presidency. This tariff encompasses a 10% baseline duty and a 20% tax tied to fentanyl trafficking, an element where China may still have scope to negotiate.
Markets barely moved in response to the breakthrough, with the S&P 500 up just 0.25% on the day of the announcement and 0.65% for the week (although the markets have also responded negatively to Friday morning’s Israeli airstrikes on Iranian nuclear and military facilities). This muted response suggests markets have, to some extent, factored in a walk-back by Trump on his radical tariff rates announced on 2 April’s “Liberation Day”.
The divergence in the mood music from Washington and Beijing is striking. Trump was quick to emphasise a headline-grabbing transactional victory. Meanwhile, China has adopted a more strategic posture, positioning the agreement as an effort to formalise dialogue and reduce sudden moves.
The rapprochement between China and the US does not mean an end to Trump’s tariff chaos. This week, Trump announced he would soon send letters to trading partners outlining unilateral tariff rates if deals are not soon concluded. This signals a return to the “take it or leave it” posturing of his first term.
At the same time, some investors and trading partners suspect that Trump’s bark is worse than his bite. Wall Street has coined the phrase Trump Always Chickens Out (TACO) to describe trades based on the assumption that the US president tends to make extreme opening bids, then settle for much less from trading partners.
As such, we can expect to see some tariff policy noise in the headlines as the 90-day pause on Trump’s ‘reciprocal’ tariffs with key trading partners runs out. Businesses and investors are braced for a cycle of tariffs being changed, paused, and reintroduced for as long as Trump’s term lasts. This will complicate long-term planning for businesses worldwide.
An appeals court hearing about whether the President exceeded his authority to impose country-wide tariffs makes the outlook even murkier. The federal appeals court ruled on Tuesday that tariffs could take effect while the legal challenge is underway. The case is expected to be resolved in the US summer.
Trump will no doubt feel vindicated by a modest inflation print for May (2.4% year-on-year). While housing and grocery prices climbed, these increases were offset by falling prices in areas such as petrol, airfares and clothing.
Nonetheless, continued dollar weakness signals that global investors remain concerned about long-term economic stability and policy unpredictability in the US. The Yale Budget Lab estimates that even with recent pauses, the effective US tariff rate remains elevated at 15.6%, the highest since 1937.
The Organization for Economic Co-operation and Development has warned that trade frictions will crimp global growth in the years ahead, with key US trading partners like Mexico, Canada, and the UK feeling the pinch. US growth is projected to slow from 2.8% in 2024 to just 1.5% in 2026, while China is set to miss its 5% growth target this year and next.
In short, risks remain. The disconnect in negotiating styles, the vagueness of commitments, particularly on rare earth exports, and Trump’s unpredictable policy tactics mean that volatility could return quickly. Wise investors will follow China’s example and focus on their long-term strategy rather than the short-term noise.
“Nothing gets you nothing, everything has got a little price!”
– Master Of The House from Les Miserables, the musical
“Today’s news about the US and China striking a potential deal on things like rare earths or access to semiconductors or jet engine equipment, that is a very good indication that we have moved through peak tariff uncertainty.”
– David Chao, global market strategist, Asia Pacific, Invesco, Hong Kong
Global News
- Israel launched a series of airstrikes early this morning targeting Iran’s nuclear facilities and ballistic missile sites, a move to which Iran retaliated with more than 100 drones. Israeli Prime Minister Benjamin Netanyahu said the strikes hit the core of Iran’s nuclear enrichment operations and targeted senior nuclear scientists and military leaders. This marks a major escalation in tensions between the two countries and raises fears of a broader conflict in the Middle East. Oil prices surged as much as 13% following Israel’s attack (but have subsequently retraced much of this move) while haven currencies gained, along with US Treasuries and gold. Stocks, however, fell. The International Atomic Energy Agency, an international watchdog, has found Iran has failed to meet its non-proliferation obligations for the first time in 20 years. This could result in Iran being referred to the UN Security Council.
- Trump announced on Wednesday that a trade framework with China has been completed, which includes Beijing providing rare earths and magnets “UP FRONT,” and the US permitting Chinese students to enrol in its colleges and universities. The countries will maintain tariffs at their current, reduced levels following the agreement reached in London, although at higher levels than when Trump assumed office. “We are getting a total of 55% tariffs; China is getting 10%. Relationship is excellent!” Trump posted while indicating the deal still needed to be signed.
- On Tuesday, the World Bank slashed its global growth forecast for 2025 by 0.4 percentage points to 2.3%, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies. In its twice-yearly Global Economic Prospects report, the global lender lowered its forecasts for almost 70% of all economies – including the US, China and Europe, as well as six emerging market regions – from the levels it projected six months ago, which was before Trump took office. The World Bank did not forecast a recession but said global economic growth this year would be the weakest outside of a recession since 2008.
- Trump will send letters to trading partners in the next one to two weeks setting unilateral tariff rates, ahead of a 9 July deadline. He aims to reimpose higher duties on dozens of economies. Speaking to reporters on Wednesday, he said: “At a certain point, we’re just going to send letters out… This is the deal: you can take it or leave it.” Commerce Secretary Howard Lutnick said the EU may not be prioritised for a deal, while Japan indicated it won’t rush into an agreement that could hurt its interests. It’s unclear if Trump will follow through with his pledge. The president has often set two-week deadlines for actions, only for them to come later or not at all.
- Meanwhile, sources have indicated that the US and Mexico are closing in on a deal that would remove Trump’s 50% tariffs on steel imports up to a certain volume. This will represent a revamp of a similar agreement between the trade partners during his first term. The talks are being led by Lutnick, as Trump has not been in attendance during the negotiations.
- The US Consumer Price Index (CPI) increased 0.1% in May after rising 0.2% in April, Labor Department statistics showed on Wednesday. However, inflation is expected to accelerate in the coming months on the back of the Trump administration’s import tariffs, with economists saying that inflation has been slow to respond to Trump’s sweeping tariffs because most retailers are selling merchandise accumulated before the import duties took effect.
- In developing news that will sure to be of increasing importance to markets, Trump said he will “soon” pick his nominee to replace Jerome Powell, whose term as Fed Chairman ends in May 2026. According to sources, the small list of candidates under consideration includes Kevin Warsh, a former Fed official who Trump interviewed for the Treasury Secretary role in November. Treasury Secretary Scott Bessent, who is leading Trump’s effort to kickstart the US economy with sweeping changes to trade, taxes, and regulation, is also in the running.
- Britain’s economy contracted in April, reflecting shockwaves from Trump’s sweeping tariff announcement and the expiry of a property tax break, official data showed yesterday. GDP fell by 0.3% from March, the steepest monthly decline since October 2023 and worse than the 0.1% drop forecast in a Reuters poll, after recording 0.2% growth in March.
- The number of wealthy individuals leaving London is rising rapidly, as the Labour Party’s “tax the rich” policy begins to take a toll on the UK economy. The scrapping of a longstanding tax break for non-domiciled residents has triggered a wave of departures, with major investors and entrepreneurs relocating abroad almost daily. According to a Bloomberg analysis of five million company filings, more than 4,400 business leaders have reported overseas moves in the past year. The policy shift is projected to cost the UK around $16.5 billion over the next four years.
- Yesterday, Meta finalised a multibillion-dollar investment in Scale AI and brought on the startup’s CEO, Alexandr Wang, to contribute to its AI initiatives. Valued at $14 billion, the deal is Meta’s largest external AI investment and one of the biggest private funding rounds in history, placing Scale AI’s valuation at $29 billion. Zuckerberg has also recruited top engineers from companies like Google as he is focused on positioning Meta at the forefront of artificial general intelligence (AGI), aiming to build machines capable of matching or exceeding human performance across a wide range of tasks.
- Nvidia and AI search firm Perplexity said on Wednesday they are partnering with more than a dozen AI companies in Europe and the Middle East to refine those companies’ AI technologies and distribute them to local businesses. The chip company will work with model makers to help make AI models in local languages become what are called reasoning models, which can carry out more complicated tasks. AI technologies built in English and Chinese have started to shift to that technology, but transitions are more difficult in languages where less training data is available.
- Apple shares dropped 1.2% following its Worldwide Developers Conference on Monday, as the company fell short of delivering the AI-driven turnaround investors had anticipated. While Apple unveiled new features such as live translation, group chat enhancements, and various software updates, the market reacted negatively to the absence of a revamped Siri voice assistant, which Apple has said it will now release in the northern hemisphere’s spring next year.
- As at Thursday’s close the S&P 500 was 0.65% up for the week.
Local News
- President Cyril Ramaphosa will meet with Trump on the sidelines of the G7 Summit in Canada over the weekend. On Tuesday, Ramaphosa also said he would also have separate meetings with the Chancellor of Germany, Friedrich Merz, and Canadian Prime Minister, Mark Carney. The President told reporters that attending the G7 was a “great opportunity” from which Pretoria expected “good outcomes,” and it would use the chance to affirm its November G20 agenda.
- Ramaphosa on Tuesday announced plans to convene a national convention, scheduled for 15 August, which will lay the groundwork for a national dialogue aimed at forming a new social compact. The dialogue, expected to be modelled on the Codesa talks held as apartheid came to an end, will unite government, business, labour, and civil society, aiming to address mounting political and economic pressure and build consensus on a shared national vision. Ramaphosa said a steering committee of individuals from various sectors, including former National Party MP Roelf Meyer, will be established to coordinate the implementation of the process. Meyer was a pro-democracy negotiator during Codesa.
- Mining Minister Gwede Mantashe has reversed his position that the draft Mineral Resources Development Bill should contain requirements for companies that want prospecting rights to be empowered. In a correction notice published on Monday, the Minister also removed the ministerial consent requirement for a change of control of listed companies. Legal experts had warned that the proposed law, in its original form as published in May, would dampen deal-making activity and scare away foreign investment.
- Although DA chairman Helen Zille is willing to run for Johannesburg Mayor in the 2026 municipal elections, the party’s Gauteng leadership has yet to formally deliberate on potential candidates, according to the province’s DA leader, Solly Msimanga. The DA is aggressively pushing to regain control of Gauteng’s economic hub. The party, the second largest in Johannesburg, opened applications for mayoral candidates in March in four metros, including Ekurhuleni, Tshwane, Mangaung, and Johannesburg.
- Moody’s said last Friday it expects a mild pickup in economic growth to about 1.8% by 2027 and government debt to hover around 80% of GDP for the next two to three years, although it indicated that South Africa’s rating is constrained by persistent, deep-rooted challenges such as low growth, domestic political tensions and perceptions of corruption. It lowered its real GDP growth forecast slightly to 1.5% in 2025, from 1.7% previously as a result of global economic headwinds. Moody said, in a recently published note, that GDP growth of 0.6% in 2024 fell short of expectations.
- Manufacturing production fell 6.3% year-on-year in April 2025, a steeper decline than expected, although in line with a global production slowdown, Statistics South Africa reported on Wednesday. This follows a weak first quarter, with manufacturing weighing heavily on GDP. Over the past three months, output dropped 1.4%, with seven out of ten manufacturing divisions reporting negative growth. Mining also underperformed, shrinking 7.7% in April, its sixth consecutive monthly decline, driven largely by a 24% year-on-year plunge in platinum group metals production.
- Naspers and Prosus expect strong earnings growth for the year ended March 2025, driven by improved e-commerce performance and gains from their Tencent stake, the companies said late on Wednesday. Naspers forecasts a 56 to 63% rise in core headline earnings per share, while Prosus sees up to 63% growth. Both cite lower impairments, strategic Tencent sell-downs, and expanding e-commerce operations as key drivers. Full results are due on 23 June.
- Telkom reported a 62.3% rise in full-year earnings on Tuesday and boosted free cash flow, allowing it to resume dividends and sweeten the pay-out with a special dividend after a four-year suspension. It had been conserving the cash for spectrum auctions and to strengthen its financial position. Revenue increased by 3.3%, ahead of expectations. Telkom declared a final dividend of 163 cents per share and a special dividend of 98 cents per share, thanks to proceeds from the disposal of its mast and tower business Swiftnet.
- Barloworld is closer to being purchased by a consortium made up of Entsha and Saudi Arabia’s Zahid Group. On Monday, the industrial company said that it had been granted Competition Commission approval to go ahead with the sale of a 40.93% stake to the two companies. The Commission imposed conditions, including that the consortium implement a 13.5% B-BBEE transaction after it is delisted from the JSE and A2X. The consortium continues to woo investors to sell them the balance of the listed industrial company’s shares, with major supplier Caterpillar having backed the transaction.
- Goodyear on Tuesday confirmed it is closing its manufacturing operations in Nelson Mandela Bay, in what the National Union of Metalworkers of South Africa, which has 339,000 members, has called a major blow to employment in the Eastern Cape. The move forms part of a broader restructuring of Goodyear’s operations in Europe, the Middle East, and Africa as it adapts its footprint and product portfolio to new market conditions. The plant, which has been operational since 1947, currently employs around 900 people directly and supports more jobs through its broader value chain, including catering, security, logistics, and maintenance services.
- As at the time of writing, the rand was 0.97% weaker against the dollar, and the ALSI was 0.3% down for the week.
Sources: Dynasty, Reuters, Bloomberg, CNN, BusinessLIVE, IOL Business, Business Report, NYT, WSJ, Daily Maverick, Daily Investor, ITWeb, BBC, etc.
