General
Publications & Data
Join the conversation
Social Links
Social Links
South Africa was one of the lucky few countries that received a letter from US President Donald Trump with a “new” tariff determination on Monday, more letters followed during the course of the week. SA’s tariff was set at 30%, unchanged from the reciprocal tariff announced on Liberation Day. The implementation date was set for 1 August, and although Trump initially said that it wasn’t “100% firm” yet, he later indicated that he would not extend it. In the meantime, the US is open for (more) negotiations. Earlier on Monday, Trump had warned that any country adopting the anti-American policies of BRICS would face an additional 10% tariff, but there was no mention of this in the letter SA received.
Fellow BRICS member Brazil got slapped with a 50% tariff on Wednesday. Unlike most countries facing reciprocal tariffs (incl. SA), Brazil runs a trade surplus with the US (i.e. it imports from the US than it exports to the US). In his letter, Trump makes it clear that the reason is political, and he intends to penalise Brazil for the “witch hunt” on former President Jair Bolsonaro. Side note, Brazil is the US’s largest coffee supplier and a significant supplier of iron ore. Trump, perhaps fearing that some of the reciprocal tariffs may be struck down by the courts, has ordered a so-called section 301 investigation into Brazil specifically. While this will take time, it could be a basis for sustained tariffs going forward.
President Cyril Ramaphosa responded to the announcement of the US’s tariff on SA by saying that the calculation is based on the wrong data. Trump later in the week explained that the reciprocal tariffs are based on “common sense, based on deficits, based on how we’ve been over the years, and based on raw numbers”. Arguing about the accuracy of data is therefore unlikely to sway his position. Hopefully, by highlighting what SA can offer the US and being pragmatic, there is some scope to wiggle down the tariff, as some other countries have successfully done. However, the “worst case” of a 10% universal tariff that the SA government hoped now looks to be turning into a best case. That said, a fair point made by the Financial Times is that there is unlikely to be a ‘definitive policy’ in a Trump world. While we expect the impact on the entire SA economy is relatively small, some motor manufacturing and pockets of agricultural produce will be hit hard.
The rand weakened sharply after the announcement, while dollar-denominated government bonds declined, but both recovered later. Global financial markets did not move much as more announcements were made, possibly expecting another TACO (Trump Always Chickens Out) despite repeated assurances from Trump that no further extensions would be granted. If they are harsher than expected, announcements on trade with big trading partners like the European Union (EU) and India man may cause jitters. Following the so-called Liberation Day in April, the EU threatened to respond with targeted retaliation should it feel necessary. So far, only China has really retaliated (and got a relatively favourable trade deal…).
In commodity markets, copper futures recorded the biggest intraday gain in decades, hitting a record high, after Trump said he would place a 50% levy on copper imports. However, there is no clarity on what kind of copper will be targeted with the tariff (i.e. raw or refined). The US currently imports about 60% of its copper needs. During the same engagement, Trump also threatened to impose a 200% levy on pharmaceuticals. After the passage of the so-called 'Big Beautiful Bill’, Elon Musk announced plans to form an 'America Party', citing a need to 'restore freedom', though details remain sparse. While Tesla shares dipped due to investor concern that Musk would once again be distracted by politics, Nvidia became the first company to reach a $4 trillion market cap (about 7.5% of the entire S&P 500 index). The S&P 500 hit a record high on Thursday.
The weekend’s announcement by OPEC+ to increase crude production by about half a million barrels per day from August did not significantly move the oil price. Markets seem to want to wait to see the actual production ramp-up relative to the announced increase. Furthermore, even with the steady increase in recent months, production remains below pre-pandemic levels. At the same time, estimates for near-term US production are being scaled down (although still set to reach record highs), which, along with Red Sea attacks, contributes to upward pressure on prices. Bloomberg reports that OPEC+ is now discussing a pause in further production increases.
Finally, on the global front, Trump promised more weapons for Ukraine mere days before Russia launched its biggest aerial attack on Ukraine yet, with its ground offensive also progressing. He also said a ceasefire in Gaza was close, which was later downplayed by a senior official from Israel. The EU reached a deal to allow for more aid into Gaza.
In SA, Operation Vulindlela released its Phase II progress report while budget votes continued (see more on both these topics in the reform monitor below). Finance Minister Enoch Godongwana, during the National Treasury’s budget vote, commented on the potential inflation target change. He said the responsibility of changing the target lies with the finance minister. While low inflation is good for the economy, he argued that more technical and political engagements were necessary, and the decision should not be made in haste. While acknowledging the near-term costs, we maintain that the time for a change in the inflation target framework has arrived. Our and others ' views on the inflation target change are included in Claire Bisseker’s latest article for the Financial Mail, which can be read here (for free after registration).
China, usually the first major economy to publish GDP data for the previous quarter (with little to no subsequent revisions), will release its Q2 print mid-week. The expectation is that growth will slow from the stronger-than-expected 5.4% y-o-y figure recorded in Q1 as the tit-for-tat trade war with the US escalated during Q2. However, a government-stimulus-driven lift in consumer spending could counter this somewhat.
Other notable international data releases include June's US and UK consumer inflation prints. Both may sway the market’s interest rate expectations for the respective central banks a little, with the inflation expectations included in the Michigan Consumer Sentiment index due on Friday also important for the US. Several Federal Reserve officials are scheduled to speak next week. In the Eurozone, final June inflation data will be released, though major surprises are unlikely after preliminary estimates showed price growth inching closer to the ECB’s 2% target. Investors will also watch for any commentary from ECB officials ahead of the central bank’s late-July policy meeting.
Locally, internal trade and mining production figures for May will help colour in the picture for Q2 GDP growth. While mining production was still steeply down on an annual basis, m-o-m output growth improved for a second month in April. Another monthly uptick bodes well for the sector’s contribution to GDP growth. Retail sales started surprisingly strong in Q2, possibly supported by renewed access to retirement savings under the two-pot system. A slight loss of momentum is expected in the May data, as that effect begins to fade.
On the political front, President Cyril Ramaphosa is set to address the nation on Sunday evening about developments following last week’s public statement and allegations by KwaZulu-Natal Police Commissioner Lt-Gen Nhlanhla Mkhwanazi.
Roy Havemann
The first progress report under Phase II of Operation Vulindlela (OV), the government’s flagship structural reform initiative, provided an update across its seven focus areas: energy, water, logistics, visas, local government, spatial integration and digital infrastructure.
Overall, 56% of Phase II activities are either on track or completed (with further work required), 27% are delayed but under way, 7% face significant challenges, and 10% have not yet started.
As expected, delays are more common in the newer reform focus areas. For instance, half of all local government reform activities are either facing serious challenges or have not yet started. The figure is even higher for spatial integration, where 60% of activities are off track. Of particular concern is the lack of progress on standardising and professionalising the appointment of senior municipal officials. Interestingly, the OV team notes that work on transitioning to a utility model for water services has not yet begun, despite notable progress in cities like Cape Town and Tshwane.
It is still early in the OV reform programme and while progress remains slow and incremental, the overall direction is positive
A series of Budget Vote speeches by Ministers provided some updates on progress in reform areas:
Nkosiphindile Shange
According to Stats SA, factory output grew by 0.5% y-o-y in May 2025, following a downwardly revised contraction of 6.4% in April. This performance beat Reuters’ analysts' expectations of a further 1.5% contraction in May. This marks the first positive year-on-year growth in manufacturing production so far in 2025. Five of the subsectors contracted, while the other five expanded. The metal subsector grew by 4.3% and contributed 0.9% pts. The motor vehicles and transport equipment subsector contracted by 6.7%, shaving 0.6% pts from growth. On a monthly basis, factory output rose by 2% in May, building on downwardly revised growth of 1.7% in April. The second consecutive increase bodes well for the sector’s contribution to GDP in Q2.
Katrien Smuts
The NFIB* Small Business Optimism Index fell to 98.68 in June, from 98.8 in May. Although the index remains above its historical average, it has declined notably from post-election highs, when sentiment improved following an election outcome that was welcomed by the small business community. However, the latest data reveal several concerning trends. On net, more firms raised selling prices, reduced capital spending, reported difficulties filling open positions and lowered expectations for economic growth. Persistent uncertainty continues to weigh on investment decisions. Capital expenditure was lower in the first half of 2025, and the share of firms planning to increase investment over the next six months declined slightly. In addition, the net share of firms that have raised prices in the last six months and those planning future price increases rose in June, pointing to mounting inflationary pressures in the US economy
*National Federation of Independent Business
While monthly CPI inflation for June remained in deflationary territory at -0.1%, the annual rate edged up slightly to 0.1%, from -0.1% in May. Urban consumer prices rose marginally by 0.1% y-o-y, while rural prices declined by 0.2% y-o-y. Notably, food prices fell by 0.1% y-o-y, and consumer goods prices dropped by 0.2% y-o-y. These trends align with anecdotal reports of Chinese exporters cutting prices to the US, attempting to maintain market share and absorb the cost of newly imposed tariffs. Although these are external-facing prices, such moves may reflect broader downward pressures on domestic retail and production prices.
For the first half of 2025, average CPI inflation in China stood at -0.1%, underscoring continued weakness in domestic demand despite targeted stimulus measures.
Editor: Lisette IJssel de Schepper
Tel: +27 (0)21 808 9755
Email: lisette@sun.ac.za
Click here for previous editions of this publication.
Please refer to the glossary on the BER website for explanations of technical terms.
Friday, 11 Jul 2025
