The paradox of retreat, Weekly News Flash

Back in April, US President Donald Trump’s announcement of plans to impose sweeping tariffs on US trading partners triggered a massive slump in equities. Stocks bounced back fast after Trump announced that most “Liberation Day” tariffs would be paused to give the US time to negotiate trade deals with other countries.

It is in that context that we should see the market’s nonchalance to Trump’s renewed tough talk on tariffs. Earlier this week, the US president sent letters to 14 countries, including Japan, South Korea, South Africa, and Brazil, threatening that new tariffs would take effect on August 1, with no further extensions. But then Trump added that he was still open to negotiating with counterparts.

US equities appear to have shrugged off the news. The S&P 500, currently trading at record highs, looked set to end the week more or less flat at the time of writing. After several rounds of Trump announcing and then postponing or softening tariffs, many investors have evidently assumed that he will retreat as he has done so often.

Markets being desensitised to Trump’s rhetoric may present a real danger in that he will no longer believe that there is any necessity to backtrack to placate investors. (Trump suggested yesterday that equities market strength was a sign that markets like tariffs.)

It is also important to note that while Trump’s tariffs have yet to reach the extremes he promised with Liberation Day, US tariffs are at the highest level seen for years. According to The Economist, the average US import tariff now stands at around 10%, up from 2.5% last year. The August measures could push that up to 18–19%.

Trump and his administration appear emboldened by the fact that the new tariffs imposed this year have not yet had much impact on prices. However, it may take some time for the effects of these tariffs to filter through. Retailers have so far absorbed some of the tariff costs, and the impact may have been blunted by stockpiling before tariffs took hold.

Furthermore, Trump’s inconsistent approach to tariffs means that businesses face prolonged uncertainty. Enterprises could adapt to their supply chains to new tariff regimes and trade barriers – if they knew what they were facing. Right now, it is hard to build new factories or sign multi-year supplier deals if the rules are subject to political whims.

Against this backdrop, investors should not be too certain that peak tariff uncertainty is over. With stretched equity valuations, bad economic news (whether tariff-related or not) could lead to a sudden reversal of confidence in equities markets.

“Markets are strong on the assumption Trump will retreat; markets being strong reduces the incentive for Trump to retreat.”

– Paul Donovan, Chief Economist, UBS GWM

“We have the biggest increase in tariffs in anybody’s living memory, but [the market] is taking a very relaxed view on what that might do. I’m concerned about the lack of concern.”

– Kasper Elmgreen, CIO of equities and fixed income at Nordea Asset Management

Global News

Trump reignited his global trade war on Monday, renewing his threat to impose punishing tariffs on partners starting August 1, an extension of the July 9 deadline. Key among them is a 25% “reciprocal” tariff on imports from Japan and South Korea, unless new trade deals are reached. This is part of a broader plan to impose duties ranging from 25% to 40% on goods from 14 countries. Despite promising deals with 200 nations earlier this year, Trump has so far secured agreements with only China, the UK, and Vietnam.
Trump also warned nations against retaliation on social media on Monday. “If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by will be added” to the threatened levels, Trump wrote. During a Monday night meeting with Israeli PM Benjamin Netanyahu, Trump said: “If you want to play ball… This is what you have to pay.” China cautioned the Trump administration on Tuesday against reigniting trade tension by restoring tariffs on its goods next month and threatened to retaliate against nations that strike deals with the US that result in China being cut out of supply chains.
Separately, yesterday, Trump revealed a 35% tariff on Canadian imports, up from 25%, set to take effect next month, dealing a setback to Canadian trade negotiations. While goods under the United States-Mexico-Canada Agreement on trade and certain energy and fertiliser imports may remain exempt, broader blanket tariffs of 15% to 20% on other trading partners are also being considered.
Trump also plans to impose a 50% tariff on copper imports as part of a broader package of upcoming sector-specific duties. He signalled that pharmaceutical companies could be granted at least a year before a proposed 200% tariff on foreign-made drugs takes effect. If enacted, the copper tariff would raise costs across multiple sectors of the US economy due to its heavy reliance on imports. In response to Trump’s remarks, copper futures in New York jumped as much as 17%, the biggest intraday gain on record since at least 1988, while spot copper prices on the London Metals Exchange fell below futures. The surge followed a late-June rush by traders to ship copper to the US to capture premium prices.
Elon Musk has formed a new political party, as threatened, a day after Trump signed the “Big Beautiful Bill” that provides for tax cuts and increased spending. The Tesla owner, who is against the bill, announced the new party on his social media platform, X, on Saturday, after posting the results of a poll that he said showed 65% of respondents wanted an America Party. “Today, the America Party is formed to give you back your freedom,” said Musk. Trump has doomed the party to failure, saying on Sunday that “third parties have never worked, so he can have fun with it, but I think it’s ridiculous”.
The Trump administration can move forward with plans to dismantle federal agencies and cut tens of thousands of jobs, the Supreme Court announced on Tuesday. The order lifts a lower court’s ruling that had blocked mass layoffs and is a key moment in testing the extent of Trump’s power to reorganise the government without input from Congress. Technically, it is temporary and guides how the administration can proceed while the challenge to Trump’s plans continues. Several labour unions, advocacy groups, and local governments are suing to block the order from being implemented.
Trump said on Tuesday that Jerome Powell should “resign immediately” if allegations from an administration official that the Fed Chairman misled lawmakers over renovations at the Fed’s head office prove true. Some media reports have asserted the Fed’s renovation of its headquarters is over budget and includes several extravagant features, while the Fed has blamed higher input and labour costs. Trump also deepened his attacks against the head of the central bank over interest rate policy. In a social media post, Trump accused the Fed Chairman of “whining like a baby about non-existent Inflation for months and refusing to do the right thing…CUT INTEREST RATES JEROME – NOW IS THE TIME!”
Close Fed watchers have indicated that anyone who succeeds Powell as Fed Chairman may not deliver lower borrowing costs as Trump has demanded. Adjusting interest rates requires the support of a majority on the Federal Open Market Committee, according to Mark Gertler, an economics professor at New York University. The next Fed Chairman will have to win over colleagues with a reasonable case for cutting rates, as a chairman “can’t act like a dictator,” Gertler said.
The Trump administration’s curbs on immigration and ramped-up deportations will lower US economic growth by almost a full percentage point this year, according to a study from the Federal Reserve Bank of Dallas, which was released this week. A huge drop in immigrants and increased efforts to deport more foreign-born workers could subtract about 0.8 percentage points from GDP in 2025, according to the study. Economists expect US growth to cool to 1.5% in 2025, according to a Bloomberg survey, from close to 3% in each of the previous two years. The researchers acknowledged that there was a lack of historical data that made the study difficult.
Russian President Vladimir Putin has intensified his offensive in Ukraine, reportedly anticipating renewed US pressure, according to analysts and Kremlin insiders. With the conflict escalating, observers say Putin is unlikely to halt without major concessions from Ukraine. Following a heavy Russian airstrike, President Volodymyr Zelenskiy urged allies at a reconstruction conference in Rome to support Ukraine with weapons, joint defense production, and investment. Delegates pledged $12 billion in aid, while the US committed to supplying arms through NATO. Trump, frustrated by stalled negotiations, is weighing new sanctions, with a formal statement expected Monday.
Bitcoin soared past $112,000 for the first time on Wednesday, hitting a new all-time high alongside a broad rally in risk assets that has lifted both large and small tech stocks. The cryptocurrency climbed as much as 3.1% to $112,009, bringing its year-to-date gain to nearly 20%. The surge reflects strong speculative momentum in markets, even as Trump rolls out a new wave of tariff announcements.
Nvidia on Wednesday became the first company in history to reach a $4 trillion market valuation as its stock jumped 2.8%, marking a remarkable comeback from a challenging start to the year amid DeepSeek’s debut and Trump’s trade war. The latest catalyst for the stock has been a commitment to AI investment from major clients, such as Microsoft, Meta, and Amazon. According to a Bloomberg analysis of various internal documents, Chinese companies plan to deploy over 115,000 Nvidia AI chips in 36 data centres. Since the beginning of 2023, Nvidia’s shares are up more than 1,000% and now account for 7.5% of the S&P 500 Index, near its highest influence on record.
Nvidia-backed Perplexity AI said on Wednesday it has launched Comet, a new web browser with AI-powered search capabilities in a bid to challenge market leader Google Chrome. The browser aims to replace traditional navigation with agentic AI that can think, act, and decide on behalf of users. It integrates a built-in assistant that can compare products, summarise content, book meetings, and transform complex workflows into simple, conversational experiences. It will be widely available during the northern hemisphere’s summer.
IBM on Tuesday announced a new line of data centre chips and servers that it says will be more power-efficient than rivals and will simplify the process of rolling out AI in business operations. The Power11 chips are its first major update to its “Power” line of chips since 2020. Power chips have traditionally vied against offerings from Intel and Advanced Micro Devices in data centres, particularly in specialised sectors such as financial services, manufacturing, and healthcare.
Tesla shares fell nearly 8% on Monday after Musk unveiled plans to launch a new US political party, which reignited concerns about his commitment to the company’s future as it struggles with declining sales. Musk’s political move comes days after Tesla posted a second straight drop in quarterly deliveries, pressuring its stock, which has lost 35% since hitting a record high in December and is the worst-performing among the “Magnificent Seven” this year. Tesla executives will address shareholders on 6 November, which is four months beyond the legal deadline for its next shareholder meeting. This follows a group of angry Tesla shareholders sending a letter to the company on Wednesday, demanding it schedule an annual meeting.
SpaceX is discussing plans to raise money and sell insiders shares in a deal that would value Musk’s rocket and satellite maker at around $400 billion, according to sources. That would mark the largest-ever valuation for a privately held US company, surpassing SpaceX’s previous record of $350 billion from its share buyback in December and rivalling the values of TikTok owner ByteDance and OpenAI. The valuation reflects a range of factors, including the rise of its fast-growing Starlink satellite internet unit, which sources say accounts for more than half of SpaceX’s annual revenue, and the company’s ability to achieve new milestones with its Starship rocket programme.
Meta Platforms bought a minority stake in the world’s largest eyewear manufacturer, EssilorLuxottica, increasing the US tech giant’s commitment to the fast-growing smart glasses industry. Meta acquired just under 3% of the Ray-Ban maker, a stake worth around $3.5 billion at market prices, sources indicated. Meta is considering further investment that could build the stake to around 5% over time. The two companies have worked together for several years to develop AI-powered smart glasses. Shares of EssilorLuxottica surged 7.1%, the most in three months in Paris.
As at Thursday’s close the S&P 500 was flat, down 0.03% for the week.

Local News

South Africa is facing urgent diplomatic pressure to avert steep new US tariffs, with Trump’s administration announcing a blanket 30% duty on SA exports, effective 1 August. While some sector-specific exclusions apply, Pretoria is pushing to negotiate a reprieve, warning that the tariffs could severely damage the competitiveness of South African goods in the US market and threaten key export industries. President Cyril Ramaphosa expressed hope that ongoing talks could modify the tariffs. The move puts South Africa’s preferential access under the African Growth and Opportunity Act at risk, as the US intensifies efforts to shift trade policy toward stricter reciprocity.
US foreign policy expert Michael Walsh on Wednesday cautioned that the 30% tariff imposed on South African imports by the US was likely the first in a series of actions that will be taken against South Africa by the Trump Administration over the next year. He said Trump was going to take more retaliatory actions against South Africa for misalignment with US national security and foreign policy interests before the end of the year.
In a Truth Social post on Sunday night, Trump said he would put an additional 10% tariff on any country aligning itself with “the Anti-American policies of BRICS,” injecting further uncertainty into global trade as the US continues to negotiate levies with many trading partners. “There will be no exceptions to this policy.” Currencies from developing nations and stocks dropped early Monday as the fresh threats weighed on appetite for risk.
The China Development Bank and the Development Bank of Southern Africa on Wednesday signed a loan facility agreement worth around R5.2 billion during the annual meeting of the BRICS Interbank Cooperation Mechanism held in Brazil. The recently established facility is set to fund a diverse range of projects in infrastructure, energy, ICT, water, health, and manufacturing sectors across Africa.
US Treasury Secretary Scott Bessent will skip a G20 finance officials meeting in South Africa and will attend the World Expo 2025 in Osaka, Japan instead. Michael Kaplan, acting undersecretary for international affairs, will represent the department at the 17 to 18 July meeting near Durban, instead of Bessent. Bessent’s decision to miss the G20 finance ministers and central bank governors meeting marks the second time this year he has chosen not to attend a G20 meeting in South Africa.
According to News24’s Carol Paton, the government of national unity (GNU) is hanging by a thread, with the DA threatening to block a key budget bill and the ANC preparing for a crucial National Executive Committee meeting where the partnership with the DA is expected to face strong criticism. Despite the growing crisis, the two parties have not engaged in dialogue, and the GNU’s dispute resolution mechanisms have broken down.
The ANC has suffered a substantial decline in membership across all provinces, raising fresh concerns over the party’s internal cohesion and strengths as it prepares for pivotal local government elections in 2026. Newly disclosed figures show that total ANC membership in good standing fell 29% between August 2022 and last October. The party’s 2024 annual report, released this week, attributes the decline to various issues, including loss of engagement among traditional ANC supporters, particularly within the middle class and organised labour. The decline in membership reflects a dramatic shift in South Africa’s political landscape, which has been dominated by the ANC at the helm of governance for 30 years.
The Department of Health has received R753.5 million from National Treasury to fill the gap left by the withdrawal of US funding for HIV/Aids programmes under the President’s Emergency Plan for Aids Relief. Health Minister Aaron Motsoaledi said during his budget vote speech in the National Assembly on Wednesday that, in addition to this amount, the Bill and Melinda Gates Foundation and the Wellcome Trust had each pledged R100 million on condition that each R100 million is matched by R200 million from National Treasury, and that the money be dedicated to research. Treasury has agreed to this condition.
Work is progressing well on the proposed lower inflation target, Finance Minister Enoch Godongwana said during the National Treasury budget vote on Tuesday. Godongwana said that all stakeholders agreed that lower inflation was good for the economy, yet said it should only be done following the necessary technical and political engagements that achieve a genuine consensus grounded in a thorough consideration of the social and economic realities. Reserve Bank Governor Lesetja Kganyago, who received a pay package of R10 million last year, wants to lower the inflation target to 3%. Citi believes that the South African Reserve Bank could lower its targets at its next interest rate meeting at the end of this month.
Three provinces, the North West, Limpopo, and Mpumalanga, are at risk of a technical recession after their economies shrank in the first quarter, with early indicators suggesting that South Africa’s second quarter growth may also be weak. While South Africa narrowly avoided contraction in the first quarter, with just 0.1% growth, provincial performance varied widely. The Free State and Western Cape led with modest gains, while Gauteng’s economy was flat. Second quarter GDP figures are yet to be released.
Tobacco major British American Tobacco (BAT) has called on authorities to place customs officials at cigarette factories as part of measures to clamp down on the proliferation of illegal cigarettes, which it says is costing the fiscus R100 million a day in lost revenue. A new study by Ipsos, commissioned and paid for by BAT, says the availability of illegal cigarettes has become endemic, with nearly 80% of retailers selling illicit cigarettes, triple the number reported three years ago. The study, which surveyed more than 4,000 outlets countrywide, found that about two-thirds of retailers were selling cigarettes at less than R20 per pack, and nearly 80% were selling below the R26.22 minimum collectible tax.
US tariffs on copper have pushed the metal to record highs in recent months, with the world’s biggest miners following in tandem. Anglo American, BHP, and Glencore have added R444 billion to their combined market cap over the past 90 days, with all three mining behemoths reversing their year-to-date losses. Aside from gold and platinum group metal producers, which have enjoyed a price rally since January, most JSE-listed mining companies came under pressure in the first three months of the year, as geopolitical tension and trade restrictions threatened the outlook for base metals.
Capitec is heading towards becoming Africa’s most valuable lender after outperforming the market over the past five years, with its share price up nearly 350% in the period. It is now just R4 billion shy of FirstRand’s market value of R416 billion on the JSE. The top six banks, FirstRand, Capitec, Standard Bank, Nedbank, Absa, and Investec, are worth a combined R1.5 trillion. Investec has the second-best performance in the sector behind Capitec in the period. Investec has been named the best-performing bank in the UK and is also ahead of Standard Bank in South Africa, global financial analysis and data-driven intelligence publication The Banker’s latest rankings show.
Discovery Health on Monday criticised an inquiry into unfair discrimination and procedural irregularities, flatly rejecting its damning finding of racial bias and branding the panel’s conclusions as “flawed” in methodology, based on “unscientific assumptions and a misinterpretation of complex data”. The inquiry’s final report, tabled on Monday and handed to Motsoaledi, found that systems used by the country’s three biggest administrators – Discovery, Medscheme and the Government Employees Medical Scheme – were procedurally unfair and disproportionately penalised black healthcare professionals.
As at the time of writing, the rand was 1.46% weaker against the dollar, and the ALSI was 0.19% up for the week.