Introduction:

Impending deadline for President Donald Trump’s “Liberation Day” reciprocal tariffs, which are poised to impose steeper duties on many U.S. trade partners as the 90-day moratorium ends. This policy has generated market volatility, leading to fluctuations in the U.S. dollar and cautious reactions in stock markets, while South Africa is particularly highlighted due to its affiliation with the BRICS bloc and perceived “anti-American policies” that could trigger additional tariffs.

Key takeaways from sources:

Impending Tariff Implementation and Deadline Confusion:
- President Donald Trump’s “Liberation Day” reciprocal tariffs are poised to impose steeper duties on many U.S. trade partners as the 90-day moratorium ends.
- The original deadline for these tariffs was Wednesday. President Trump stated on Friday that he would name countries receiving new, higher levies on Monday, with those rates taking effect on August 1. However, on Monday, U.S. officials also signaled a delay on tariffs, though without providing specific details. U.S. Treasury Secretary Scott Bessent clarified that countries without trade deals would “boomerang back to their April 2 tariff level” on August 1.
- The base tariff rate announced in April was 10% on most countries, with higher “reciprocal” rates potentially reaching up to 50% or even “maybe 60% or 70%”.
- Only Britain, China, and Vietnam have successfully agreed to trade deals with the White House so far. The U.S. is preparing to send tariff letters to dozens of countries as the 90-day pause expires on July 9.
Market Reactions and Volatility:
- Market volatility appears inevitable when the pause officially ends and new tariff levels are announced. However, the impact might be “more muted this time” as current proposals are largely anticipated, and markets seem to be pricing in continued deadline extensions.
- The U.S. dollar has weakened, hovering near its lowest levels against the euro (since 2021) and the Swiss franc (since 2015). It also slipped against the yen. The dollar index remained flat or nudged up slightly against a basket of major currencies.
- Stock markets globally experienced caution and slips on Monday. S&P 500 futures, Nasdaq futures, EUROSTOXX 50 futures, FTSE futures, Japan’s Nikkei, South Korean stocks, and MSCI’s broadest index of Asia-Pacific shares outside Japan all eased. Chinese blue chips also dropped. Despite these short-term dips, global equity indices overall ticked higher on Monday, underpinning demand for higher-yielding currencies. The S&P 500 index on Wall Street had previously recovered quickly and sharply, reaching a new all-time high.
- Safe-haven bonds saw increased bids, with 10-year Treasury yields declining.
- The export-exposed Australian dollar fell, serving as a proxy for trade risk.
- Investor concerns about Trump’s often chaotic tariff policy and its potential impact on economic growth and inflation have contributed to the dollar’s undermining and influenced the Federal Reserve’s stance on interest rates.
South Africa in the Crosshairs:
- South Africa is specifically highlighted for potential additional tariffs due to its affiliation with the BRICS bloc (Brazil, Russia, India, and China) and perceived “anti-American policies”.
- President Trump has threatened an additional 10% tariff on any country aligning with BRICS. He also previously warned of 100% levies if BRICS nations abandon the U.S. dollar in bilateral trade.
- Prior to the pause, South Africa was already hit with a 10% base tariff and an additional 30% duty on imports.
- South Africa does not appear to have secured a trade deal with the United States yet, making the reversion to these elevated tariffs likely on July 9. However, Treasury Secretary Bessent’s statement suggests some nations might have an option for a three-week extension to negotiate, with levies taking effect on August 1.
- U.S. Representative Greg Steube has introduced a Bill to Congress proposing to suspend direct assistance to the South African government and impose targeted sanctions on political officials. Steube asserts that South Africa is unfairly targeting Israel, inciting hostility towards the U.S. and its allies, engaging with a corrupt government, weaponizing its political system against the Jewish people, and jeopardizing U.S. national security interests by indulging terrorist organizations and their sponsors.
- Steube’s rationale includes South Africa’s support for Hamas following the October 7 attacks, including formal meetings with Hamas representatives, and a cooperation agreement with Iran to expand economic ties, which involves the development of five oil refineries in South Africa by the Iranian Oil Ministry. The Bill also claims South Africa has increasingly aligned with authoritarian regimes hostile to U.S. national interests and democratic values.
BRICS Bloc Response:
- BRICS leaders, meeting in Sao Paulo, condemned U.S. and Israeli attacks on Iran.
- They also expressed alarm over rising global trade tariffs, noting the threat they pose to the global economy and their export-dependent economies.
- The BRICS nations agreed to continue discussions on developing a cross-border payment system for trade and investment.
Other Key Economic Influences:
- Oil prices slid after OPEC+ agreed to a larger-than-expected production increase of 548,000 barrels per day in August, with a warning of similar hikes in September. This strategy is seen as an attempt to target Brent oil futures around $60-65/bbl to challenge the economics of U.S. shale oil supply growth. The return of Brent oil prices below $70 per barrel is likely to reverse recent strong increases in South African fuel prices.
- Federal Reserve (Fed) Policy: While softer U.S. inflation prints reinforced expectations of Fed rate cuts by year-end, a strong increase in non-farm jobs (147,000 in June) and a lower unemployment rate (4.1%) with stable core inflation expectations (2.80%) suggest the Fed may abstain from lowering its bank rate at its July meeting. The odds of a July cut significantly decreased after the jobs report. Investors are awaiting the FOMC meeting minutes for further indications on future rate cuts.
- Commodity Prices: As a major exporter of gold and platinum, South Africa benefits from firmer base-metal prices, which directly support the Rand. Gold gained almost 2% last week as the dollar fell, and an uplift in gold and platinum prices underpinned ZAR demand.
- FATF Grey-List Optimism (South Africa): South African Reserve Bank Governor Lesetja Kganyago indicated “substantial completion” of the action plan to exit the anti-money laundering grey list. Markets welcomed this news, anticipating lower cross-border costs and renewed foreign investment interest.

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Sources referenced:

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