The US tariffs have turned the global economy into a roller-coaster as it affects every part of economic growth and decline.
In what was supposed to be a quiet week on the economic front, US tariffs kept people watching the economic news, while there was local news on mining production and retail sales.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), says the big global data prints of the week came on Tuesday, with better-than-expected Chinese GDP growth for the second quarter and US core inflation coming in lower than expected, but still (finally) reflecting some signs of tariffs being passed on to consumers.
In South Africa, she says, the uptick in mining production and retail sales was positive for gross domestic product (GDP) for the second quarter.
“There was plenty of political news to digest. Globally, US President Donald Trump dished out more tariffs to be implemented on 1 August, while the push to essentially oust US Federal Reserve (Fed) chair Jerome Powell continued.
“Locally, President Cyril Ramaphosa placed police minister Senzo Mchunu on special leave, something which has never happened before, pending the outcome of another commission of inquiry.”
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Big story of the week: 30% US tariff on European Union
She points out that the big story over the weekend was that the US plans to impose a 30% tariff on the European Union (EU), more than the 20% Liberation Day tariff announced in early April. Key training partners Canada (35%) and Mexico (30%) face similar hurdles, although some exceptions for trade covered by the United States-Mexico-Canada Agreement (USMCA) remain in effect.
“All countries have, so far, held off on immediate retaliation, but the EU finalised a list of countermeasures to strategically target US exports to the EU. It has held off on retaliating so that negotiations can continue, but plans to target €72 billion of imports, ranging from industrial goods (Boeing, cars and machinery) to agri-food products (including bourbon).
“Some EU countries pushed for the option to use anti-coercion instruments, which give broader powers to, for example, introduce taxes on US tech companies or restrict access to parts of the market.”
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Headlines in global markets written in halls of power, not just Wall Street
Bianca Botes, director at Citadel Global, says this week in global markets the headlines were written not just on Wall Street, but in the halls of power from Washington to Beijing. “Trade, technology and teetering central bank policies collided, reordering how investors see risk, reward and the future path of markets.”
She says Trump’s surprise announcement of potential sweeping tariffs on its key trading partners, South Korea, Japan, Brazil and Canada, sent waves through the commodity world and reignited concerns about global supply chains.
“Notably, a proposed hefty 50% tariff on copper imports, potentially starting 1 August, catapulted the red metal’s futures prices. While previous tariff announcements sometimes triggered swift, knee-jerk selloffs, market reaction this time was more nuanced.
“Why? Investors are, by now, warier but also somewhat desensitised to the tug-of-war on trade. Rather than a wholesale equity retreat, money, instead, flowed into safe havens. Silver surged nearly 4% and select commodity classes outperformed as investors hedged their exposure.
“This sector-by-sector action underscores a key theme for 2025: the world is learning to trade around trade policy, analysing which assets get hit hardest and which might benefit.”
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Oil and gold also affected by US tariffs
Botes points out that oil steadied on supply worries, while gold dipped on strong data. “Brent Crude hovered near $69.60/barrel, holding on to a 1.5% gain, after geopolitical tensions and tighter supply boosted prices.
“Meanwhile, gold hovered just below $3 340/ounce, heading for its first weekly decline in three weeks. The retreat follows stronger US data, with retail sales rebounding and jobless claims hitting a three-month low, thereby reducing the urgency for Fed rate cuts.
“Despite the policy tug-of-war within the Fed, gold remains underpinned by geopolitical risks and tariff uncertainty. With Trump’s notification of tariff rates to over 150 trade partners, safe haven appeal remains intact.”
According to Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, the rand is trading around R17.70/$ this afternoon, pulling back from R17.92 last Friday despite worries about the 30% import tariff on exports to the US. “The rand benefited from positive sentiment that boosted emerging market currencies.”
In commodity markets, the Brent Crude Oil price softened on concerns about the effects of the Trump tariffs on global demand, while gold continued to move around $3 340 and platinum jumped to the highest level since August 2014 as supply concerns worsened.
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Will mining production perform better in the second quarter?
Mining production increased by an above-consensus 0.2% in May, marking the first annual expansion since the start of this year, after a sharp 7.7% contraction in April. Iron ore was the largest positive contributor, while declines in manganese ore and coal production were the biggest drag.
Nomvelo Moima, an economist at the BER, says that barring a sharp reversal in June, it appears the mining sector is likely to contribute positively to GDP in the second quarter.
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say the increase in seasonally adjusted mining output suggests a continued improvement in output in the second quarter, with production up 2.6% in the three months until May.
“Should this trend continue, mining production will contribute positively to GDP growth.”
Nkonki and Matshego say the outlook remains murky. “While most mining products will likely be exempted from the 30% US tariff on South African imports, the ongoing tariff war will hurt global growth in the quarters ahead, weighing on export demand and commodity prices.”
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Retail sales and motor trade faring better, but wholesale drags
Statistics SA released a batch of domestic trade data for May, affirming that consumer spending remained solid during the second quarter. Real retail trade sales increased by 4.2%, while motor trade sales increased by 4.7%.
However, the wholesale sector did not fare too well, as annual wholesale trade sales contracted for a fifth straight month in May by 4.3%.
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say retail activity over the past three months reflected no growth compared to the preceding three-month period, suggesting that household spending is losing momentum. “However, any build-up in momentum in June will support GDP growth.”
Nkonki and Isaac Matshego point out that only general dealers and hardware stores saw sales increase over the month, while sales at most other retailers, including online stores, declined in May.
“Despite the mixed results, sales remained well above last year’s levels across the board.
“Retailers should benefit from the ongoing recovery in consumer demand as household incomes strengthen, inflation remains relatively subdued, and the recent interest rate cuts reduce borrowing costs and revive credit demand.”