Tariffs on global markets, triggering substantial stock market volatility and raising concerns about a potential global recession. This policy shift has also led to retaliatory measures from countries like China and is affecting the performance of various national economies and currencies, including South Africa’s.
Here are the key takeaways:
- President Trump’s announcement of widespread tariffs, described as a “Liberation Day” for America, triggered significant turmoil in global equity markets. This led to a “bloodbath” on Friday, with the Dow Jones losing 2,231 points and the S&P 500 dropping 6 percent, marking the stock market’s worst week since 2020.
- An untrue report about a possible 90-day pause on tariffs caused extreme volatility in the stock market on Monday, with major markets experiencing rapid shifts from losses to gains and back to steep losses. This rumor stemmed from reports on CNBC and social media citing National Economic Council Director Kevin Hassett, although there was no evidence he made such a claim.
- White House Press Secretary Karoline Leavitt refuted these reports as “fake news,” leading the markets to reverse their gains and continue their downward trend. Hassett himself, when asked about a 90-day pause, responded that “the president is going to decide what the president is going to decide” and urged for less rhetoric.
- JPMorgan’s Chief Economist now sees a significantly increased chance (60 percent) of a global recession in 2025 due to these developments, noting that the last comparable increase in recession probability occurred in 1968 and was followed by a recession.
- Despite the market losses, President Trump publicly praised his tariff plan, claiming that oil prices, interest rates, and food prices are down, there is no inflation, and the US is gaining billions from tariffs. He urged strength, courage, and patience, believing “GREATNESS will be the result!”.
- China retaliated against Trump’s new tariffs with a reciprocal 34 percent levy, prompting Trump to threaten an additional 50 percent tax on Chinese imports, potentially raising the total import tax rate on Chinese goods to 104 percent. Trump stated this action was in response to China ignoring his warning against retaliation and announced the termination of talks with China regarding requested meetings.
- The “Magnificent Seven” tech stocks experienced a significant downturn, losing around $2 trillion in combined value as investors worried about the financial consequences of Trump’s tariff war. Analysts warned of a “tariff economic armageddon,” with price target cuts for major companies like Apple and Tesla due to their exposure to tariffs and potential impacts on supply chains and consumer demand.
- South African markets and the rand were also negatively impacted by Trump’s tariffs and global recession fears. The rand slumped to an 18-month low, and local stocks plunged before recovering somewhat. While South Africa has its own economic challenges, it is being affected by the global uncertainty caused by the tariffs. Although the US is not South Africa’s largest export market, the tariffs pose both direct and indirect risks to its exports, potentially leading to a weaker growth outlook.
- Economists predict that Trump’s tariffs could significantly increase US inflation and negatively impact US economic growth, with the potential for retaliatory countermeasures from other countries leading to even higher tariffs. There is increasing concern that Trump is willing to accept economic weakness to achieve his policy goals.
- Interestingly, during this period of tariff turmoil, the US dollar has been under pressure, contrasting with previous global shocks where investors typically sought the safety of the dollar.
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Sources:
- South African rand hits 18-month low, stocks recover from plunge – CNBC Africa
- Despite turmoil on the global markets, the JSE ends March and first quarter on a positve note
- Trump’s tariffs: Bloodbath for markets and rand worse than during pandemic – economists
- Trump threatens additional tax increase on Chinese imports as markets spiral amid trade war
- Investors seek refuge in dollar, yen as tariff fallout grips markets
- Tariff storm ravages Magnificent Seven as Apple nears one-year low
- Stock market goes haywire with massive swings after ‘fake news’ reports about future of Trump’s tariff plan