South Africans will need to keep up with what happens in the world’s largest economy, as the return of US President Donald Trump has the potential to shape markets back home.<\/p>\n\n\n\n
This could result in pressure on the rand, higher inflation, and a much slower interest rate cutting cycle.<\/p>\n\n\n\n
The USA has now seen the return of Trump as president following his inauguration on 20 January 2025.<\/p>\n\n\n\n
Momentum Investments said that with inflation and stagnant real wages hurting families, Trump’s focus on job creation and tax cuts resonated deeply with the US electorate, securing his win in November 2024.<\/p>\n\n\n\n
This was particularly effective with apolitical young men during the election campaign.<\/p>\n\n\n\n
Despite high prices being a key reason for his victory over former Vice President Kamala Harris, Trump’s administration’s proposals are leading to substantial fears over another round of heightened inflation.<\/p>\n\n\n\n
Momentum Investments said that the Trump administration’s focus on aggressive tariffs, mass deportations and expansive tax cuts could inadvertently undermine progress toward lower inflation rates.<\/p>\n\n\n\n
This could lead to further price pressures in the USA, further complicating the US Federal Reserve and the South African Reserve Bank’s (SARB’s) path forward for rate cuts.<\/p>\n\n\n\n
Following Trump’s election victory, financial markets have recalibrated their expectations regarding the extent of interest rate cuts. <\/p>\n\n\n\n
Analysts originally anticipated a series of gradual rate cuts as the Fed aimed to stabilise the economy
amid easing inflation and a cooling labour market.<\/p>\n\n\n\n
However, the return of Trump has led to a more cautious outlook amid concerns about inflation, which could lead to higher terminal rates. <\/p>\n\n\n\n
Developments at the Fed affect South African interest rates as the SARB’s decisions are often linked to movements in the US. <\/p>\n\n\n\n
For instance, increased interest rates in the USA will often lead to the SARB increasing rates to ensure that the rand does not weaken against the US dollar. <\/p>\n\n\n\n
Momentum Investments added that Trump has further threatened to impose 100% tariffs on BRICS countries, including South Africa, if they attempt to create a new currency that competes with the dollar.<\/p>\n\n\n\n
However, South Africa’s government has repeatedly noted that there are no plans to create a common currency between the BRICS members. <\/p>\n\n\n\n
However, Maarten Ackerman, Chief Economist at Citadel, noted that many of Trump’s anticipated policies have already been priced in, leading to subdued immediate market reactions.<\/p>\n\n\n\n
That said, proposed policies like trade tariffs on China could create ripple effects for emerging markets like South Africa.<\/p>\n\n\n\n
\u201cTrade wars could weaken global growth and pressure the rand, but aggressive Chinese economic stimulus could benefit SA as a key commodity exporter.\u201d<\/p>\n\n\n\n
Ackerman also flagged risks related to the African Growth and Opportunity Act (AGOA), which is crucial for South Africa’s automotive sector, among other things.<\/p>\n\n\n\n
“A reduction in AGOA benefits could harm one of SA\u2019s few growing manufacturing sectors, with significant implications for Gross Domestic Product and jobs.\u201d<\/p>\n\n\n\n
Trump’s policies are also likely to strengthen the US dollar, challenging South Africa’s growth prospects and putting upward pressure on inflation.<\/p>\n\n\n\n
Ackerman said South Africa needs to introduce structural reforms in energy, infrastructure, and business efficiency to attract investment and build resilience.<\/p>\n\n\n\n
Although there are risks, Ackerman sees opportunities in new global trade patterns and highlights the importance of a diversified investment portfolio to mitigate volatility. <\/p>\n\n\n\n
\u201cWith the right reforms and strategies, South African investors and businesses can navigate uncertainty while positioning for growth.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Momentum Investments and Citadel have broken down what Trump’s return means for South Africa. <\/p>\n","protected":false},"author":95,"featured_media":802595,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[11282,3137],"class_list":["post-807797","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-citadel","tag-momentum-investments"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807797","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=807797"}],"version-history":[{"count":10,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807797\/revisions"}],"predecessor-version":[{"id":807842,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/807797\/revisions\/807842"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/802595"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=807797"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=807797"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=807797"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}