SA faces turbulent economic outlook, rising inflation as US tariffs wreak havoc

THE hefty tariffs imposed by the US President Donald Trump on imports to the world's largest economy left a trail of turmoil on global financial markets, with the JSE All Share Index plunging 3.4% to 86 082 index points, its worst performance in more than a month.

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President Trump on Wednesday unveiled a 10% tariff on all imports, with significantly higher rates for countries with trade surpluses - 30% for South Africa, 34% for China, and 20% for Europe, the country's other large trading partners.

Investec chief economist, Annabel Bishop, said financial markets have had to make negative projections and further volatility was likely on adjustment, either “up” or “down” causing uncertainty to markets.

“With the 30% tariff, and expected to lose its US legislated Aqoa benefits, SA vehicle exports are expected to be impacted, along with those manufac-ture in particular, and with the uneven tariff impositions remaining the SA goods will lack out,” Bishop said.

“There are some heightened risks for US recession, inflation and fewer US interest rate cuts this year. Rate weakness adds to SA inflation, and we expect the rand will pull back further still.”

The new levies heightened concerns over the US economic outlook and reignited fears of a recession.

According to RMB Morgan Stanley, the tariffs could imply a contraction in the trade surplus of between 0.2% and 0.3% of gross domestic product (GDP).