Fulfilling his pledge to deliver his flagship domestic legislation by Independence Day, US President Donald Trump signs the One Big Beautiful Bill Act (OBBBA) into law today, after it was eventually approved by the House last night. The blockbuster legislation enacts sweeping tax cuts for corporations and the wealthy and reshapes federal spending priorities, with immediate and long-term implications for markets.
The Act makes Trump’s tax cuts from 2017 permanent and adds new tax breaks for top income earners, overtime pay, and auto loans. On the spending side, OBBBA earmarks massive allocations to immigration enforcement (around $175 billion) and military spending ($150 billion), including the construction of the proposed “Golden Dome” missile defence system.
OBBBA takes a knife to America’s social security net, with Medicaid and food stamp programmes facing the largest cuts in their history. Tax credits for clean energy are eliminated, while the solar and wind industries are penalised. Student loan subsidies are also on the chopping block.
Despite these cuts, the Act is expected to contribute significantly to the national debt and government deficit. According to the Congressional Budget Office, OBBBA could add over $3.9 trillion to the national debt over the next decade, including interest. This will be driven chiefly by the tax cuts.
Trump’s apparent plan to plug the revenue gap is through tariffs, cuts to social security spending, and cost savings generated by the Department of Government Efficiency (DOGE). However, most economists agree that these measures will not compensate for the loss of tax revenues and the spending increases.
With the federal deficit already running at 6.7% of GDP and net government debt poised to breach 100% of GDP this fiscal year, hawks are concerned about the sustainability of the US’s fiscal path. The Treasury may need to issue debt at a time when investor appetite is softening, especially following the recent downgrade of the US’s sovereign credit rating.
We may well see investors seek a rise in Treasury yields, reflecting higher expected borrowing and greater term premia. This unfolds at a time when some countries, notably in Asia, are diversifying from the dollar due to what they view as an increased risk in holding US debt. It is worth noting, however, that foreign holdings of US debt reached a record $9.05 trillion in March 2025.
The US dollar has fallen 10.8% against a basket of major first-world currencies this year, and many economists expect the expansionary nature of the Act to lead to further weakness. With both fiscal and current account deficits set to widen, the current dollar weakness could turn into a longer-term trend.
Tougher immigration enforcement, the stimulative effects of tax relief and military spending, and Trump’s tariff path, meanwhile, could all add upward pressure to inflation in the months to come. The Federal Reserve has already expressed caution about cutting interest rates due to tariffs. OBBBA could further complicate the path to easing.
Equities markets were relatively unmoved by OBBBA’s passage. In fact, the Nasdaq and the S&P 500 were both hovering around record highs after gaining 1.6% and 1.7%, respectively, this week. In the shorter term, manufacturing, consumer goods, and defence stocks may benefit from the Act’s provisions, while clean energy, health, and education stocks could come under pressure.
For now, investors appear not to be pricing in the longer-term structural risks of the Act nor its short-term stimulus effect. But with rising deficits, higher borrowing costs, and potential inflationary pressures looming, OBBBA may test the resilience of the US economy long after the 4 July fireworks have faded.
“The impact of this bill on the real economy is going to fall far short of the negative impact of debt issuance that it comes with.”
– Max Gokhman, Deputy Chief Investment Officer, Franklin Templeton Investment Solutions
“Is the market still too complacent about what these deficits mean long-term? Yes, and longer term we ought to expect more premium in the long end.”
– Campe Goodman, Fixed Income Portfolio Manager, Wellington Management Company
Global News
- House Republicans narrowly passed Trump’s sweeping “One Big Beautiful Bill Act” last night, following a Senate vote. The 218–214 vote, largely along party lines, came after a frantic push by Speaker Mike Johnson to rally support and overcome internal resistance that nearly derailed the legislation. With all but two Republicans backing the bill and Democrats united in opposition, the vote cleared the way for Trump to sign it by his self-imposed 4 July deadline.
- The US trade deficit widened more than expected in May, with both imports and exports declining as Trump’s tariffs sent shock waves through the economy and snagged supply chains. Trade data published on Thursday showed the world’s biggest economy logged an overall trade gap of $71.5 billion in the month after Trump imposed a 10 percent duty on most trading partners before pausing steeper rates for dozens of these economies. This was an expansion from the $60.3 billion deficit in April, according to the Commerce Department.
- Moody’s Ratings and Fitch Ratings have both issued strong warnings about worsening global credit conditions, pointing to rising trade tensions, particularly ahead of Trump’s full tariff reinstatement on 9 July, along with policy uncertainty and geopolitical risks as key threats to economic stability in 2025. On Thursday, Moody’s downgraded its global sovereign outlook from stable to negative. Fitch echoed these concerns in its Midyear Update released on Wednesday, downgrading 56 of 288 sector and asset performance outlooks to “deteriorating”. The agency highlighted four major risks for the rest of the year: trade and tariffs, inflation and interest rates, geopolitical tensions, and fiscal policy.
- Trump said yesterday that his administration will start notifying trading partners, likely beginning Friday, of the new unilateral tariff rates they must begin paying by 1 August if no deals are struck before the 9 July deadline. He mentioned that around 10 to 12 letters would go out initially, with more to follow, after the administration paused its reciprocal tariffs in April to allow for negotiations. While the UK, China, and Vietnam have reached deals, major partners like Japan, South Korea, the EU, and India are still negotiating. By warning that countries will simply be informed of their tariff rate if talks fail, Trump is raising the stakes amid limited progress and growing global uncertainty.
- Canada announced late on Sunday that it had withdrawn its digital services tax to revive US trade talks, which have since resumed. However, its tight control over dairy, eggs, and poultry by restricting production and limiting imports through onerous tariffs could be a stumbling block in trade negotiations. Trump has attacked Canada’s tariffs on dairy products. France also said on Sunday it expects an agreement by the deadline, while the EU is reportedly open to a universal 10% tariff but is pushing for further concessions on specific goods.
- The most recent trade deal signed with Vietnam on Wednesday affects tariffs and market access, leading to volatility in US clothing and footwear stocks. Vietnam’s major export brands, such as Nike, surged, with Nike shares rising 2%. Investors are closely watching for further developments.
- Trump on Monday ramped up pressure on the Fed, accusing Chairman Jerome Powell in a handwritten note of costing the country “a fortune” and urging interest rate cuts. Powell responded on Tuesday, saying the Fed might have already lowered rates this year if not for Trump’s tariffs. Treasury Secretary Scott Bessent said the administration may use the next Fed board vacancy in early 2026 to appoint Powell’s successor. Powell’s silence on whether he’ll step down when his term as chair ends in May 2026 is creating uncertainty, as officials prepare for various scenarios, including Powell staying, being replaced, or Bessent taking on dual roles.
- Headline numbers from the June jobs report eased pressure on the Fed to consider a rate cut this month, with interest rates now expected to remain steady until the Northern Hemisphere’s autumn. The economy added 147,000 jobs in June, beating expectations, and the unemployment rate dipped to 4.1%, according to Bureau of Labor Statistics data released on Thursday. However, the headline figures masked underlying weakness, including a decline in private payrolls and other signs of a softening labour market. ADP Research data released on Wednesday showed employment at US companies fell in June for the first time in over two years, while Bureau of Labor Statistics data released on Tuesday revealed a surprising rise in job openings in May, suggesting companies remain cautious about hiring.
- UK car manufacturers started exporting to the US under a 10% tariff on Monday, which is a discount to the 25% rate imposed by Trump on other countries, as the first elements of an economic agreement between the two countries comes into effect. British aerospace companies like Rolls Royce Holdings also saw 10% tariffs on goods, including engines and aircraft parts, slashed to zero. However, there is still no sign of progress toward lowering levies on the UK’s beleaguered steel industry, which remain at 25% despite Britain previously announcing an agreement to reduce them to zero.
- Trump on Tuesday threatened to withdraw government subsidies from Elon Musk’s companies and examine the billionaire’s immigration status after the Tesla CEO increased his criticism of the President’s tax and spending Bill. “Elon may get more subsidy than any human being in history, by far, and without subsidies, Elon would probably have to close up shop and head back home to South Africa,” Trump said separately in a Truth Social post. Tesla has benefited from a popular $7,500 consumer tax credit for electric vehicles that Trump’s Bill will eliminate.
- Iran appears to have severed communication with key officials from the UN’s nuclear watchdog, heightening uncertainty surrounding its nuclear programme and adding further complexity to its standoff with Washington. According to sources, Iranian nuclear-safety regulators have ceased responding to calls from the Vienna-based International Atomic Energy Agency after formally halting inspections last week. The US has announced new oil sanctions on Iran in a bid to cripple its top source of revenue. Some of the proceeds from the oil sales have benefited Iran’s Islamic Revolutionary Guard Corps-Qods Force, which the US has designated as a terrorist group, the Treasury Department said yesterday.
- UK markets tumbled, with the rout spilling into global bonds, as speculation about a possible exit by Chancellor of the Exchequer, Rachel Reeves, made investors nervous about the state of Britain’s finances. The pound was the worst-performing major currency in the world on Wednesday, slumping more than 1% to below $1.36. Stocks also fell. The latest selloff was ignited after Prime Minister Keir Starmer initially failed to confirm Reeves would be in her post at the next general election when asked in Parliament. Wednesday’s moves were reminiscent of the gilt-market blowup under Prime Minister Liz Truss in 2022 but were partially reversed on Thursday as Starmer backed Reeves to continue in her role.
- Britain’s economy grew at its fastest pace in a year in the first three months of 2025 as homebuyers rushed to beat a deadline on property purchases and manufacturers sped up output ahead of Trump’s higher import tariffs. Output grew by 0.7%, confirming a preliminary estimate and the fastest quarterly pace since the first three months of 2024, the Office for National Statistics said on Monday. The Bank of England has said it expects economic growth of about 0.25% in the second quarter of this year. Growth for March was revised up to 0.4% from a previous reading of 0.2%.
- Recent results from US auto companies show that sales are losing momentum after a northern hemisphere springtime surge, fuelled by shoppers racing to buy cars before Trump’s auto tariffs drove up prices. General Motors said deliveries rose 7.3% in the second quarter, as industrywide demand cooled following a stronger-than-expected April and May. Ford Motor’s second-quarter sales jumped 14%, helped by its employee-pricing-for-everyone discount program, though it saw the pace of growth moderate in June. Toyota sales in the April-through-June period rose 7.2%, but volumes were essentially flat last month.
- Nvidia reclaimed the top spot among the most valued companies worldwide in June, as its shares were supported by renewed optimism over its leadership, AI, and expectations of surging demand for its AI chips. The chipmaker’s market value stood at $3.86 trillion at the end of June, about 4.3% higher than Microsoft’s $3.69 trillion valuation.
- Apple is considering using AI technology from Anthropic PBC or OpenAI to power a new version of Siri, sidelining its in-house models in a potentially massive move aimed at turning around its flailing AI effort. The iPhone maker has talked with both companies about using their large language models for Siri, according to sources. It has asked the two companies to train versions of their models that could run on Apple’s cloud infrastructure for testing, said the people, who asked not to be identified discussing private deliberations. If Apple ultimately moves forward, it will represent a monumental reversal from its previous standpoint of in-house development.
- Microsoft began job cuts that will impact about 9,000 workers, its second major wave of layoffs this year as it seeks to control costs while ramping up on AI spending. Less than 4% of the company’s total workforce will be impacted, a spokesperson said on Wednesday. The cuts will have an impact across teams, geographies, and tenure and aim to streamline processes and reduce layers of management. After spending tens of billions of dollars on data centres and application development, Microsoft has pledged that it will put a lid on costs.
- Tesla shares jumped 5% on Wednesday after the carmaker posted a less drastic decline in vehicle sales than the most pessimistic analysts feared. The company delivered 384,122 vehicles during the last three months, down 13% from a year earlier. While that leaves Tesla in a deep hole to dig out from to avoid another annual drop, some investors were braced for a more than 20% plunge. The sales figures contradict Elon Musk’s mid-May claim that its car business had recovered from an early-year slump. The company could see sales further affected as tax credits for EV purchases are eliminated by Trump. Shares are down about 22% for the year.
- Novo Nordisk’s top executives ignored internal warnings that the company was not sufficiently prepared for the launch of its weight-loss drug Wegovy, leaving the Danish drugmaker in a more vulnerable position when rival Eli Lilly entered the market, sources told Reuters. Lilly’s Zepbound pills outstripped Wegovy in weekly new prescriptions this year, and Novo is struggling to convince investors it can remain competitive in the weight-loss boom. Following the surprise ouster of former CE Lars Fruergaard Jorgensen, US chief Doug Langa, who had insisted on a commercial launch very soon after Wegovy’s US approval without first securing medical insurance cover, has now resigned.
- As at Thursday’s close, the S&P 500 was 1.67% up for the week.
Local News
- South Africa may need to revise its trade agreement with the US to align with the Trump administration’s new trade framework for sub-Saharan Africa, according to Trade, Industry, and Competition Minister Parks Tau. Although the framework suggests Washington seeks more reciprocal trade, South Africa has not yet seen the document in its totality. South Africa has also requested more time to negotiate a deal before higher US tariffs take effect on 9 July, the Department said on Tuesday. Initially, South Africa aimed to exempt key exports like cars, steel, and aluminium from the proposed 31% tariffs by offering to buy US liquefied natural gas, while also proposing a 10% tariff cap if exemptions aren’t granted.
- The African Development Bank has cut its growth forecast for South Africa to just 0.8% for this year, down from 1.6%, according to its latest Country Focus Report. The downgrade is largely due to trade tensions expected to weigh on net exports. Additional risks include reduced development aid and a slowdown in China’s economy. These challenges highlight the urgency for South Africa to fast-track structural reforms to cushion against global headwinds, including Trump’s ongoing trade war. National Treasury had previously revised its growth outlook down to 1.4% from 1.9%, citing rising geopolitical tensions and Trump’s tariff hikes in May. The US remains South Africa’s second-largest export market after China.
- South Africa’s inflation expectations have dropped to their lowest level in four years, with the latest Bureau for Economic Research (BER) survey showing anticipated consumer price growth below 4% for 2025. In its second-quarter report released Wednesday, the BER noted that respondents revised their 2025 inflation forecast down by five percentage points and now expect more moderate cost-of-living increases over the next two years. Current inflation is at 2.8%. However, Investec chief economist Annabel Bishop expects it to edge up to 2.9% in June and 3.1% in July. She also suggested a 25-basis-point interest rate cut could come in November, though a rate cut this month is unlikely.
- Government has rejected the South African Reserve Bank Amendment Bill, which would make the Bank fully owned by the state, saying its impact on the embattled economy, investment, or fiscus has not been assessed. This is according to National Treasury deputy director-general for tax and financial sector policy Christopher Axelson, who was addressing the standing committee on finance this week. There were also concerns about changing the mandate of the Bank and political interference in monetary policy. The Bill was introduced by EFF leader Julius Malema in 2018.
- The DA has announced it will vote against the budget votes for human settlements, higher education, and other departments led by ministers implicated in corruption. According to Parliament’s senior legal adviser, if even one individual budget vote is rejected by the National Assembly, the entire Appropriation Bill cannot be passed. This raises the risk of the DA being removed from the Government of National Unity, potentially making the party reconsider its stance. The move comes after President Cyril Ramaphosa dismissed Deputy Trade Minister Andrew Whitfield and failed to act on the DA’s calls to remove ministers accused of corruption.
- JSE-listed Goldrush Group, which is part of the consortium that has been awarded the licence to operate the fourth national lottery, has defended the inclusion of Deputy President Paul Mashatile’s sister-in-law in the consortium. Goldrush said on Thursday it was comfortable with the minority stake held by Khumo Bogatsu, twin sister to Mashatile’s wife, in the consortium, saying her participation was vetted. Goldrush owns around 50% of Sizekhaya, which beat seven other bidders to the lucrative contract, and is chaired by betting company Phumelela Gaming’s Chairman, Moses Tembe.
- South Africa’s manufacturing sector showed tentative signs of recovery in June, with the Absa PMI rising to 48.5 from 43.1 in May, its second‑highest level this year, driven by a 7.8‑point increase in new orders, signalling improved demand. However, output remained weak at 41.9, and the index stayed below the 50-point threshold for the eighth consecutive month due to ongoing production and logistical challenges. While the data signals some optimism, analysts caution that a sustained recovery will require further improvement in both supply chain efficiency and broader economic conditions.
- Mercedes-Benz South Africa (MBSA) has suspended vehicle manufacturing operations at its East London assembly plant until the end of July. While the company says “planned operational shutdowns” are not unusual, April’s imposition by the US, a key customer, of a 25% tariff on imported cars may have contributed to the decision. MBSA, without specifically mentioning the US, said on Monday that “it is common cause for production plants to suspend production based on volume adjustments in the production programme”.
- Elon Musk’s Starlink has lined up about R2 billion to invest in building regional infrastructure to support the entire Southern African Development Community region. It is set to spend the cash on building a network of earth stations with fibre-optic connections to data centres to bring the internet traffic in the region down to South Africa, and to buy capacity from local internet service providers, which would provide the internet back to the region, according to sources. Starlink expects to be in more than 30 African countries by year-end.
- Sun International shares rose as much as 8% in intraday trade on Tuesday after news that the company will no longer pursue its R7.3 billion acquisition of rival casino group Peermont Holdings. This decision followed a recommendation by the Competition Commission last October that the merger be prohibited as it could result in less competition. In its latest annual report, Sun International had expressed hope that the Competition Tribunal would still approve the deal despite the commission’s recommendation.
- Famous Brands has raised concerns over the growing impact of online betting on consumer spending, saying that the surge in betting activity is eroding disposable income and weighing on restaurant traffic. In its latest annual report, released on Monday, the Debonairs and Steers owner indicates that online gaming platforms are now a big factor shaping consumer behaviour. It noted that R1.1 trillion was wagered by consumers in 2023, 40.2% higher than in 2022.
- Pick n Pay CEO Sean Summers said in the company’s annual report that the 2025 financial year was the start of a multi-year turnaround to sustainable, long-term profitability. Its trading loss had been reduced by two-thirds, against the group’s target of a 50% reduction, and it was debt-free. It has identified the informal retail sector as a significant competitor in grocery retail, highlighting that the rise of the informal economy, removal of lease exclusivity in some shopping centres, and growing demand for affordable, local shopping are challenging traditional supermarkets.
- Dis-Chem is facing mounting pressure due to a shortage of suitable retail space and intensifying competition across the healthcare and retail sectors, the pharmacy group said in its latest annual report released this week. Any delays in its strategy of opening new stores or buying independent pharmacies could hinder its ability to enter new markets, grow revenue, and defend its share in an increasingly competitive environment. Dis-Chem operates 285 retail pharmacy stores across South Africa, Namibia, and Botswana.
- As at the time of writing, the rand was 1.35% stronger against the dollar, and the ALSI was 1.18% up for the week.
Sources: Dynasty, Bloomberg, BusinessLIVE, CNN, Business Report, IOL Business, WSJ, NYT, TechCentral, ITWeb, Reuters, Daily Maverick, Engineering News, AFP, etc.
