Escalating US tariffs send SA market into tailspin amid political uncertainty

Rand plunges to two-year low by 1.6% to R19.44 against the dollar, its lowest since May 2023

- SIPHELELE DUDLA

THE fallout from escalating US import tariffs reverberated across global markets on Monday as fears of trade tensions between the United States and China grew, with South Africa's economy bearing the brunt of the turmoil exacerbated by domestic political uncertainty.

The rand plunged to a near two-year low to R19.44 against the US dollar during early trade on Monday, its lowest level since May 2023, after falling 1.6% to R19.44/$ spurred by the uncertainty over the future of the Government's National Party (GNU).

The rand also fell 1.25% to the British pound in early morning trade on Monday - the worst level ever against the pound.

Financial markets remained on edge on Monday over the outcome of the GNU National Working Committee, which is set to vote on the constitution of the GNU, after the DA disagreed with the ANC's increases proposed in the new budget.

Investec chief economist, Annabel Bishop, said the recent substantial US tariff measures would have seen the rand weakening R12.50/S1 but as weakness driven by factors alone due to high political risk.

“Without the threat of the DA exiting the GNU and hence the government in South Africa, the rand would be substantially stronger, well below R18.00/$1 after the imposition of unit tariff measures from the US, with many countries seeing higher appreciation,” Bishop said.