US President Donald Trump’s chaotic approach to tariffs with the country’s major trading partners caused more upheaval in the markets this week, and there is no off-ramp in sight. Investors and traders have not only continued to flee equities over the past five days but have also cut their exposure to US Treasuries, which were once seen as a safe haven.
Markets have been downbeat since Trump announced sweeping and seemingly arbitrary tariffs against nearly every country in the world last week. On Wednesday, Trump said he would suspend tariffs against most countries, bar China, back to 10% for the next 90 days to allow for negotiations, causing a short-lived but very significant bounce in equities markets.
However, he doubled down on his trade war with China, ratcheting tariffs against the country up to 125% after China retaliated against his opening salvos. China initially applied an 84% tariff on US imports in return and has shown no willingness to back down against Trump. The US receives around 13 to 14% of China’s exports.
This escalating trade war between the world’s two biggest economies has significantly increased the possibility of US and global recessions this year. The trade in goods between the two economic powers amounts to around $585 billion a year. The US imports far more from China ($440 billion) than China imports from America ($145 billion), but both countries have much at stake.
A prolonged trade war between these two countries could potentially stoke inflation in the US, lifting prices of a whole host of products. It could also slow down economic growth in the US, with exports of soybeans, energy, integrated circuits, and other products to China supporting hundreds of thousands of US jobs.
In a shock scenario, further deterioration in Sino-American trade could contribute to a stagflation crisis in the US. But the continued health of the US labour market and more open trade (at least for now) with Canada, Mexico, and other nations could help to mitigate the worst outcomes.
Nonetheless, the world and US economies are on rockier ground than they were at the outset of Trump’s return to the White House. While Trump has sliced tariffs for most trading partners, we cannot discount the possibility that he will renew aggressive import duties on these nations after the 90-day pause.
Furthermore, many new Trump tariffs remain firmly in place. The 25% tariffs on cars and auto parts, which went into effect on 2 April, and the 25% tariffs on steel and aluminium, which went into effect on 12 March, are still in effect. And Trump continues to talk about plans to hit sectors like pharmaceuticals with fresh tariffs.
With the prospect of a prolonged China-US trade war and uncertainty about American trading relations with the rest of the world, it is no surprise that global equities markets are in turmoil. Although the S&P 500 saw a record bounce-back of 9.52% on Wednesday after Trump scaled back his tariff plans, it surrendered one-third of its gain on Thursday.
At the time of writing, equities markets worldwide were deeply in the red since Trump’s “Liberation Day” on 2 April. In dollar terms, the S&P 500 was down 7.1%, the Nasdaq was down 6.9%, the Euro Stoxx 50 was down 9.1%, the Nikkei 225 was down 2.8%, the Hang Seng was down 10.7%, the FTSE 100 was down 9.6%, and the World MSCI Index was down 6.7%.
The VIX – the Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options – is at a five-year high. This suggests that investors are braced for turbulence, given the uncertainty about the endgame of Trump’s trade war.
Meanwhile, US Treasury bonds have also been falling sharply, with some reports suggesting that a sudden jump in bond yields was the main reason Trump blinked on Wednesday. If yields remain high and make borrowing more expensive, this could exacerbate challenges for the US economy.
Furthermore, the US dollar index is at its weakest point since 30 September 2024. This, along with the bond selloff, suggests that investors aren’t regarding US currency and bonds as a safe haven for now. It may even reflect a wider loss of confidence in the US as a business and investment destination. We could see the start of a reorganisation of the world economic order should the US not correct course in the months to come.
From a Dynasty perspective, we have adopted a cautious approach about investing new money into equities markets for our clients over the last number of months. While we are reluctant to call a bottom for the markets after the current sharp pullback, we are beginning to incrementally use the dips as an opportunity to phase offshore cash into our preferred equity indices and funds. But for rand-based investors, we remain reluctant to externalise funds at the current exchange rate of circa R19.37 against the dollar.
At the same time, Wednesday proved how unpredictable and sharp stock market recoveries can be. A phased investment approach remains wise, with volatility and unpredictability certain to prevail for the months to come. The Trump cards are wild!
(Click here to see Monday’s communique on our investment approach in the current environment and to view the recovery patterns from previous crises).
“The partial suspension of American tariffs for 90 days sends out a signal and leaves the door open for talks. But this pause is a fragile one.”
– French President Emmanuel Macron
“Bear markets bring about increased risk, but perhaps not in the way we might think. Sharp declines in equity markets create incredibly high levels of behavioural risk. The chances of us making decisions which compromise our long-run outcomes are incredibly high.”
– Joe Wiggins, financial author
Global News
- On Wednesday, half a day after President Trump’s higher-than-initially-indicated “Liberation Day” reciprocal tariffs came into effect, Trump announced a 90-day pause on increasing tariffs for most US trading partners, offering a temporary reprieve in his ongoing global trade conflict. However, the announcement came with a sharp escalation in tariffs on China, as Trump accused Beijing of continuing to undermine fair trade practices. While the suspension aims to encourage negotiations with countries that have not retaliated against US tariffs, it does not roll back previous duties and does not apply to products like steel, aluminum, autos, lumber, and pharmaceuticals, which remain subject to existing or planned tariffs. The contrasting approach underscores Trump’s strategy of isolating China while encouraging broader international alignment with US trade policy.
- Markets surged initially in response to Trump’s pause on global tariffs, with the tech-heavy Nasdaq Composite soaring 12% – its best single-day performance in 24 years! The S&P 500 jumped 9.5%, marking its biggest gain since 2008, while the Dow rose 7.9%, its strongest rally since 2020. Although these gains partially reversed the steep declines triggered by earlier tariff announcements, markets remain below 2 April pre-announcement levels.
- In retaliation for the US raising tariffs on Chinese imports to 125%, China announced on Friday it would hike tariffs on American goods to 125%, up from 34%, effective 12 April 2025. The sweeping increase targets major US industries such as agriculture, aerospace, automobiles, semiconductors, and food products. China has also let its tightly managed currency weaken, cut purchases of dollars, and warned citizens against travel to America. China’s Ministry of Commerce stated the move was a direct response to what it called Washington’s violations of international trade rules and emphasised its determination to defend national interests.
- The European Union in retaliation to the initial US tariffs on steel and aluminium, approved duties on approximately €21 billion ($23.2 billion) worth of American goods, targeting products such as soybeans, diamonds, poultry, and motorcycles. These measures were set to commence in mid-April. Following Trump’s announcement of the 90-day pause on higher tariffs, the EU decided to pause its retaliatory tariffs for the same period to facilitate negotiations aimed at resolving the trade dispute.
- In a legal dispute that could impact Trump’s authority to dismiss Federal Reserve Chairman Jerome Powell, US Chief Justice John Roberts allowed Trump to temporarily remove top officials from two independent agencies while the Supreme Court deliberates on a new challenge to presidential power. The order issued on Wednesday suspends a federal appeals court ruling that had allowed the officials to return to their posts. Roberts stated that his order will remain in effect until either he or the full court makes a longer-term ruling.
- US inflation cooled in March 2025, with consumer prices rising just 2.4% annually – its slowest pace since September. Core inflation also eased, and overall prices fell slightly month-on-month for the first time in nearly five years. While costs like airline fares and hotel stays dropped, grocery prices – especially eggs – rose. Economists warn that inflation may rise again due to high tariffs on imports, despite the temporary pause in new duties.
- Friedrich Merz’s conservatives and the Social Democrats sealed an agreement to form Germany’s next government, paving the way for Merz to take over as chancellor as soon as the first week of May. Merz’s bloc will fill cabinet posts including foreign affairs, economy and interior, while the Social Democrats will run the finance, defence and labour ministries, according to sources.
- Trump’s 25% tariffs on imported vehicles, which went into effect last week, are prompting companies to stop shipping cars to the US, shut down factories in Canada and Mexico and lay off workers in Michigan and other states. Jaguar Land Rover, based in Britain, will temporarily stop exporting its luxury cars to the US. Stellantis paused factories in Canada and Mexico that make Chrysler and Jeep vehicles and laid off 900 US workers who supplied those factories with engines and other parts. Audi also paused exports of cars to the US, telling dealers to sell whatever they still had on their lots.
- The Magnificent Seven stocks gained more than $1 trillion in market value on Wednesday after the Trump tariff pause. Shares of the companies, which include AI chip giant Nvidia, Apple, Tesla and Microsoft, were up between 7.8% and 13%, which pushed the Nasdaq 12% on the day. The companies have collectively shed around $5 trillion in market value since their peak in late 2024, with the losses accelerating last week after Trump’s Liberation Day. However, yesterday, technology companies reversed a portion of these gains as fears around tariffs remained.
- Amazon.com this week cancelled orders for multiple products made in China and other Asian countries, including beach chairs, scooters, air conditioners, and other merchandise. Sources indicated that the orders, from multiple Amazon vendors, were halted after Trump’s 2 April trade tariff announcement. Amazon CEO Andy Jassy said shoppers can likely expect some prices to rise due to the ongoing global trade war, as its third-party sellers will pass costs along.
- Warren Buffett is among the rare few richest people whose personal fortunes have grown this year after Trump’s initial tariffs wiped trillions of dollars off the value of global equities. Buffett’s worth has climbed $11.5 billion this year to $153.5 billion, according to the Bloomberg Billionaires Index. Buffett is now the world’s fourth-richest person. Musk remains the world’s richest person, with a net worth of $297.8 billion despite a $134.7 billion decline so far this year. Last week Thursday and Friday, the world’s 500 richest people suffered the biggest two-day loss ever, losing a collective $536 billion on the back of pending tariffs.
- Top digital coins led the cryptocurrency market’s uptrend after Trump announced a 90-day pause in most tariffs and Paul Atkins was confirmed by the Senate to lead the Securities and Exchange Commission. This came one day after Trump’s initial tariffs crashed Bitcoin’s price to $75,000. Bitcoin, the world’s most valuable crypto asset, surged 8.1% to $82,300 after tariffs were halted, showing how crypto assets have become highly correlated with traditional risk assets.
- As at Thursday’s close the S&P 500 was 3.8% up for the week (after last week’s 9% fall).
Local News
- The global meltdown on stock exchanges due to the imposition of import tariffs saw the JSE All Share Index lower by 9% in rands and 15% in dollars as at Wednesday from recent highs. The declines were led by the biggest financial services groups in the country, such as Standard Bank and Old Mutual. At the time of writing, the ALSI had recovered 6.4% from its lows of last Friday.
- South Africa may find temporary relief from Trump’s recent tariff measures due to the 90-day pause. While a 10% blanket duty on most US imports remains in effect, this temporary suspension offers South African exporters a window to negotiate potential exemptions or more favourable terms. However, BusinessLIVE columnist Hilary Joffe writes that South Africa’s benefit from the African Growth and Opportunity Act, which gave South Africa preferential tariffs when exporting agricultural products, is “out the window”.
- Only 1.3% of South Africa’s economy is affected by the new US tariffs, making a recession unlikely. Although 8% of South Africa’s exports go to the US – now subject to a 30% import tax, key mining commodities, which make up over half of those exports, are potentially exempt. South Africa has chosen not to impose retaliatory tariffs and is instead pursuing exemptions while exploring alternative markets in Asia, Europe, and across Africa. To navigate these changes, the country is prioritising export diversification and industrial modernisation. According to the Department of Trade, Industry and Competition, the recent US move to ease certain tariffs presents a valuable opportunity for renewed negotiations with the US.
- The DA and ANC’s tough-talking attitudes about their continued partnership in the Government of National Unity (GNU) could be settling as the DA on Wednesday expressed interest in remaining in the coalition, although the ANC will reset the ground rules. The ANC has accused the DA of “acting as an opposition force” and will engage parties on the National Budget over the next five days. This follows talks as business pushes for unity to ensure confidence and investor sentiment, although investors are now taking a wait-and-see approach. ANC secretary general Fikile Mbalula has said that the 10-party coalition would remain intact even if the DA chose to exit. The ANC and DA will meet tomorrow to discuss their differences.
- President Cyril Ramaphosa’s fortnightly GNU Cabinet meeting was postponed on Wednesday, officially due to “scheduling issues”. However, this is a strong indication that the impasse in the GNU was nowhere near being resolved. News24 learnt that the vital meeting between Ramaphosa and his executive was cancelled indefinitely amid questions about which parties would be present.
- The volatile rand fell to its weakest on record against the dollar on Wednesday, surpassing a level it last hit in June 2023 as investors reacted to SA-specific risks and to the global trade war. Flirting with R20/$, the currency is being adversely affected by the ongoing collapse in commodity prices and the internal domestic turmoil presented due to instability in the GNU.
- The Parliamentary Budget Office, an independent body set up to analyse fiscal policies, lambasted National Treasury’s reasoning for hiking VAT on Wednesday, saying it is oblivious to the country’s growing inequality. Its assessment is the result of its examination of whether proposed allocations in the Division of Revenue Bill and the Appropriation Bill are appropriately targeted to address socioeconomic challenges.
- About 3.5% of individual taxpayers contribute almost half of South Africa’s personal income tax, and there is already a significant tax burden on wealthy people, most of whom are tax compliant and paying their fair share, says the South African Revenue Service. Despite this, there have recently been calls for the implementation of a wealth tax to find alternatives to the initially proposed 2% increase in VAT, a move that we don’t feel is practical or likely in the short term.
- Financing the ANC’s controversial plan for National Health Insurance will require raising between an additional R240 billion and R270 billion and place a huge tax burden on a small tax base. This is based on research by the South African Medical Association in its legal challenge to the Act. To raise this amount, VAT would have to be increased to 40% and other tax items such as personal income tax would similarly need to be increased, it said this week.
- Law firms Bowmans, Webber Wentzel and Werksmans applied to the High Court in Pretoria on Monday to join a legal challenge initiated by Norton Rose Fulbright South Africa against Trade, Industry, and Competition Minister Parks Tau’s implementation of the broad-based BEE legal sector code, which replaces the generic BEE code policy. The firms argue that its implementation could cause them to lose billions in contracts with big banks and the public sector. Bowmans, Webber Wentzel, and Werksmans believe that Tau acted unreasonably by not addressing his predecessor’s concerns before he signed the document, it was revealed yesterday. Tau will defend the changes as transformation is a key GNU policy.
- South Africa is considering expanding its Automotive Production and Development Programme to cushion the impact of new 25% US tariffs on car imports. Tau said the government is exploring support measures within fiscal limits. The US is South Africa’s third-largest vehicle export market, worth R35 billion in 2024. Major automakers like BMW, Ford, and Toyota may be hit hard, while local industry bodies warn the tariffs could raise US consumer costs and restrict access to South African-made cars.
- Government has held talks with major sponsors to pay a $50 million fee as it seeks to host the F1. The official list of Grand Prix 2027 bidders is not public but has drawn suitors from across Africa. F1 requires venues to accommodate seating for 125,000 spectators, an adequate supply of hotel rooms nearby, proximity to an international airport, public-transit links, and services such as on-site catering and VIP lounges.
- As at the time of writing, the rand was 1.4% weaker against the dollar (after last week’s 3.7% decline), and the ALSI was 6.4% up for the week (after falling 9% last week).
Sources: Dynasty, IOL, Business Report, BusinessLIVE, CNN, Bloomberg, AFP, News24, CBS News, The Guardian, NYT, Daily Maverick, WSJ, etc.
