When the Cold War ended with the collapse of the Soviet Union and the fall of the Berlin Wall, Soviet leader Mikhail Gorbachev and US President George Bush ushered in what they described as a New World Order. This was to be a peaceful era of greater cooperation between world powers – and indeed, decades of successful globalisation were to follow.
At the time, George Bush Sr. took on the mantle of underwriting global security in a unipolar world. In his view, there could be “no substitute for American leadership” as globalisation took hold. Even as the US spoke about multilateralism, it was the might of the American dollar and military that helped to preserve order.
But the world has changed dramatically since the 1990s. China continues its ascendance as a major economic and military power. Global South states like Brazil, India, Mexico and South Africa are chaffing under the influence of US-backed institutions on their sovereignty.
Russia has become increasingly belligerent as former Eastern Bloc states have lined up to join NATO and the European Union – culminating in its invasion of Ukraine in 2022, which followed the annexation of Crimea in 2014. Europeans fear that this is just the start of a resurgence in Russian imperialism that could lead to a wider war in years to come.
This is the context in which Donald Trump returned to the White House. One reading of the Trump administration is that the MAGA (Make American Great Again) movement is about recognising that years of keeping shipping lanes safe, shielding allies under its nuclear umbrella, and financing multilateral institutions are taking their toll on the US.
As administration figureheads like Deputy President JD Vance and Pete Hegseth (US Secretary of Defence), have made clear, a debt-burdened US no longer has the resources to police the entire world. The Trump administration (and the Biden admin before) sees China as a threat to world peace and the liberal order – and that is where it will focus its resources in the years to come.
This reorientation of US foreign policy could, over time, represent one of the most important geopolitical shifts since the dissolution of the Soviet Union. European allies, which have depended on US security guarantees since the end of World War II, have been cautioned to take responsibility for defence on their own continent.
Whereas Richard Nixon sought to weaken Russia in the 1970s by cozying up to China, President Trump appears to be attempting détente with Russia to undermine China. This is an alarming development for Europe, given fears that the Russian Federation may have plans to invade Baltic states if it wins in Ukraine.
This week, we saw the remarkable spectacle of the US voting with Russia and other rogue states against UN resolutions demanding an immediate withdrawal of Russian troops from Ukraine and calling Moscow’s aggression a violation of the UN Charter. European capitals have responded by committing to upping their investments in defence.
Trump is pursuing a peace agreement between Ukraine and Russia, but it remains to be seen how acceptable the final proposals will be to Ukraine. There are fears that capitulating to Russia’s demands will embolden Vladamir Putin and set the stage for conflict in the years ahead. And it is uncertain as to whether the US will continue to support Ukraine if a truce cannot be attained.
In short, the US under Trump is disengaging from many of the global burdens it once shouldered. Not only is it stepping back from European security, but it is also cutting back on aid spending and putting up barriers to free global trade to put America first. What comes next is an open question.
It may be that Trump is an aberration who will be replaced by a more multilaterally minded president in the next term. But it is also possible that we are seeing the birth of a new world order, where powers like Russia, the US, and China pursue their self-interest in a more unashamed way. Such a world may be less stable than the one we live in today.
In the worst-case scenario, consequences might include protectionism and trade wars that depress the global economy, in much the same way as the trade wars that proceeded the Great Depression. Increased defence spending may leave less money for social welfare spending in richer countries, feeding the rise of the far right and driving further isolationism.
If these trends continue, markets may experience heightened volatility as investors reassess the long-term implications of a less predictable global order. Multinationals may see profits eroded due to tariffs or decreased sales, leading to lower valuations for companies with significant international exposure.
In the short term, markets will continue reacting to economic data, earnings reports, and monetary policy shifts rather than long-term geopolitical realignments. However, the S&P 500, which had shown resilience in the weeks leading up to and just after Trump’s inauguration, has drifted 2.9% lower in February.
Trump’s on-again, off-again tariffs have contributed to this recent market weakness with the US dollar also having experienced a 1.2% decline, as represented by the DXY, an index that tracks the US dollar movement against a basket of major currencies.
The broader changes in global power dynamics cannot be ignored. A disconnecting US, rising geopolitical tensions, and shifting trade relationships and tariffs could reshape the investment landscape, influencing everything from capital flows to corporate strategies.?This is certainly the beginning of a new world disorder.
“Our allies must understand?– their security responsibility is, first and foremost, their own. The United States can no longer bear the financial and strategic burden alone, as a relationship of unilateral dependency is simply not sustainable.”?
– US Secretary of Defence Pete Hegseth
“Today that new world is struggling to be born, a world quite different from the one we’ve known.”
– George HW Bush, 41st US President – 1989 -1993
Global News
- Following last week’s meeting between Russia and the US, the Trump administration has refused to blame Russia for the Ukraine war. Both nations voted against a European-backed UN resolution at the UN General Assembly. Meanwhile, Trump continues to pressure Ukrainian President Volodymyr Zelensky to hand over control of more than half of his country’s natural resources. The two are reportedly meeting today in Washington to sign an agreement without guarantees of security. Trump’s recent criticism of Zelensky and alignment with Kremlin views has stunned NATO allies and raised doubts about the US’s commitment to Ukraine.
- European leaders marked the third anniversary of Russia’s invasion of Ukraine with visits to Kyiv to show solidarity. While US President Trump wasn’t directly mentioned, his controversial statements have raised concerns in Europe about US support for Ukraine. In response, European leaders are boosting defence and military aid, focusing on NATO’s role in the region. Danish Prime Minister Mette Frederiksen suggested NATO membership as Ukraine’s best security guarantee. They seem to have taken note of economist Jeffrey Sach quoting Henry Kissinger in the EU Parliament this week: “To be an enemy of the United States is dangerous, but to be a friend is fatal.”
- The UK is planning to host a meeting with European leaders to discuss Russia’s war in Ukraine, following recent diplomatic efforts between Paris, Washington, and Kyiv. The meeting, possibly as early as Sunday, aims to address concerns over Trump’s push for a ceasefire with Russia, which European leaders fear could weaken European security. UK Prime Minister Keir Starmer and French President Macron are engaging with Trump to ensure European input in any peace deal. The gathering would help maintain a united stance among European leaders amid ongoing discussions with Trump and his officials.
- Germany’s conservative leader Friedrich Merz won Sunday’s election, but his bloc’s narrow victory leaves him with limited options for forming a government. With just 28.6% of the vote, Merz’s only viable path to power is teaming up with Chancellor Olaf Scholz’s Social Democrats, who came in third with 16.4%. The far-right Alternative for Germany (AfD) secured 20.8%, but Merz has ruled out an alliance with them and aims to form a coalition within two months. The results underscore Germany’s fragmented politics and the challenges of reviving the economy while addressing issues like immigration and defence spending.
- Starmer has announced a major increase in UK military spending aiming to reach 2.5% of GDP by 2027 and 3% by 2034. This funding will come from cuts to overseas development aid, reducing it from 0.5% to 0.3% of GDP. At the same time, Germany’s incoming chancellor, Merz is negotiating with the Social Democrats (SPD) to approve a €200 billion ($210 billion) emergency defence fund to address military underfunding and to support Ukraine. The plan seeks to bypass Germany’s strict borrowing limits by passing the measure before the new parliament convenes on 24 March. However, securing a two-thirds majority for constitutional changes will be more difficult after fringe parties gained influence in the recent election. European defence stocks rose on the news, signalling optimism about increased military spending.
- US Secretary of State, Marco Rubio, has expressed concern about the growing Russia-China alliance, warning that if Russia becomes a “junior partner” to China, it could pose a major threat to American interests. He noted that while efforts to separate Russia from China may not succeed, maintaining a diplomatic relationship with both is crucial for global stability. Meanwhile, China has dismissed the US’s attempt to interfere in its relationship with Russia, calling it an unsuccessful effort.
- Congress narrowly passed a budget plan that cuts $2 trillion from safety net programs like Medicaid and food stamps. The goal is to partially fund the extension of Trump’s 2017 tax cuts for the wealthy, which he urged the House to make permanent just hours after the vote. The $4.5 trillion tax-cut plan faces Senate opposition due to concerns over deficits and programme cuts. House Speaker Mike Johnson secured votes through last-minute negotiations, but the Senate may amend the proposal. The budget raises the debt limit by $4 trillion to avoid default but could add $3 trillion to deficits over a decade, while setting spending reduction targets without detailing specific cuts.
- Trump could be facing a backlash to his tariffs at home. A new poll reveals skepticism among American consumers, with 60% fearing higher prices. And new US unemployment claims rose to 242,000 in the week ending February 22, marking the highest level in 2025 so far. This increase coincided with layoffs at major companies like Starbucks, Meta, and Southwest Airlines, as well as recent job cuts in federal agencies. Meanwhile, GDP growth remains solid at 2.3%, but pending home sales hit a record low in January due to high prices and mortgage rates.
- The upheavals in Washington DC appear to be affecting US consumer confidence, which dropped sharply in February and for the third consecutive month. It fell to 98.3, the largest drop since August 2021 and was driven by concerns about the economic outlook, labour market conditions, and inflation, which were worse than economists’ estimates. Consumers are increasingly pessimistic about incomes, business conditions, and a possible recession. They also expect inflation to be fuelled by higher costs and Trump’s tariffs. Uncertainty over policies and economic conditions continues to weigh on households and businesses.
- Meanwhile, Microsoft is urging the Trump administration to revise export controls that restrict the sale of advanced AI chips to certain US allies, including India, Switzerland, and Israel. The company argues that these restrictions may push these nations to rely on China for AI infrastructure, potentially undermining US business and foreign policy. Microsoft President Brad Smith warned that China could exploit this situation to present itself as a more reliable partner. While Microsoft supports some aspects of the proposed rules, such as restrictions on countries like China and North Korea, it seeks a simplified system to avoid harming US relations with key allies.
- Chinese stocks listed in the US, including Alibaba, plunged in US trading after Trump’s executive order aimed at limiting Chinese investments in US technology and strategic sectors. Alibaba lost 10%, its steepest fall since 2022, while the Nasdaq Golden Dragon China Index fell 5.2%. The order, which includes audits of foreign companies on US exchanges, heightened fears of the US and China decoupling. Despite the selloff, Alibaba remains up over 50% this year, driven by optimism around AI investments. Analysts suggest the move is part of Trump’s strategy to gain leverage in US-China negotiations.
- Nvidia reported solid but underwhelming quarterly results, with Q1 sales projected at $43 billion. Tighter gross margins due to the rapid rollout of its new Blackwell chip and potential US tariff impacts were blamed. Despite record demand for Blackwell, Nvidia’s stock fell 8.5% on Thursday, reflecting investor concerns over slowing data centre spending and worry that the emergence of AI startups like DeepSeek presages lower demand for high-end GPUs. Q4 revenue hit $39.3 billion, matching estimates, with data centre sales at $35.6 billion, surpassing expectations.
- Apple plans to create 20,000 new jobs and invest $500 billion in the US over the next four years. It intends to produce AI servers in Texas, expanding data centres across multiple states, and supporting smaller manufacturers through a new academy in Detroit. Research and development efforts will also be boosted.
- Tesla’s sales in Europe plummeted 45% in January, amid a 37% growth in overall EV sales across the industry. The company registered just 9,945 cars, down from 18,161 a year ago. This decline comes as Tesla deals with production changes for its Model Y SUV and CEO Elon Musk’s political involvement.
- Berkshire Hathaway’s operating profit surged 71% in Q4, driven by higher interest rates and improved insurance business performance, especially at GEICO. Operating earnings were $14.5 billion, with insurance investment income up 48% to $4.1 billion. Cash reserves rose to a record $334.2 billion, though Buffett reassured investors that most of the company’s capital remains in equities.
- As at Thursday’s close the S&P 500 was down 2.5% for the week.
Local News
- Cape Town hosted the G20 finance ministers’ meeting, but it was marked by absences and disputes, with key officials from the US, China, Japan, India, and Canada skipping the event. The lack of high-level representation resulted in a lack of consensus on key issues, leading to the release of a summary instead of a formal communique. South Africa’s Finance Minister Enoch Godongwana noted that differences had emerged since the Russia-Ukraine war, particularly on climate-related topics. The meeting emphasised multilateral cooperation, financial stability, and inclusivity but did not address President Trump’s trade war threats or tariffs, which dominated the week.
- President Cyril Ramaphosa is working to strengthen South Africa’s relationship with the US, aiming to secure trade, diplomatic, and political deals. He noted the importance of a deal with Trump to boost trade and address strained relations. He has also invited Zelensky to South Africa before June, but details of the planned discussions aren’t yet available.
- President Trump has abruptly ended funding for thousands of USAID and PEPFAR-supported healthcare programmes in Africa, including HIV vaccine development and treatment initiatives. The move has caused widespread disruption and puts South Africa alone at risk of losing 25 years of progress and facing over 500,000 potential deaths. A recent 90-day waiver allowed some “lifesaving” PEPFAR activities to resume, but confusion and stop-work orders have left many clinics closed. The cuts have also halted a major HIV vaccine trial and forced layoffs of thousands of healthcare workers. Critics argue that these cuts undermine decades of progress in global health and diminish America’s strategic influence worldwide.
- The DA has proposed a three-month review of government spending to address South Africa’s R600 billion budget shortfall, rejecting tax hikes or borrowing. The party aims to cut wasteful spending to stabilise the national budget and also to reallocate funds to essential services like healthcare and education. This contrasts sharply with the ANC’s opposition to spending cuts and plans to impose a wealth tax. The Institute for Economic Justice (IEJ) proposed alternatives to a VAT hike but supported the ANC’s call for a wealth tax along with corporate tax reforms and improved tax collection. SARS Commissioner Edward Kieswetter came out against raising taxes, warning that it could stifle economic growth and erode trust in the tax system.
- Moody’s is confident the Government of National Unity (GNU) will agree on a budget adhering to fiscal consolidation despite the delays and disagreements. The ratings agency advised addressing fiscal deficits while balancing social spending and support for struggling state-owned enterprises like Eskom and Transnet. It emphasised the importance of a transparent budgetary framework for institutional strength.
- An impediment to investment is South Africa’s presence on the Financial Action Task Force’s (FATF) greylist. But, with only two of the 22 action items still needing attention, Treasury remains optimistic that October will see removal from the greylist. Exiting the list should enhance investor confidence but benefits for citizens may not follow immediately. SA was greylisted in February 2023 for failing to meet anti-money laundering and terrorist financing standards.
- On the economic front, inflation rate rose to 3.2% in January, up from 3% in December, following a data overhaul by Statistics South Africa. The increase, driven by housing, utilities, insurance, and financial services, aligns with economists’ estimates. Reserve Bank Governor Lesetja Kganyago cautioned about external risks, such as rising tariffs, which could disrupt global disinflation. Traders anticipate a 24% chance of a 25 basis-point rate cut in March, but the Monetary Policy Committee is expected to hold rates steady due to inflation concerns.
- The Competition Commission has demanded Google compensate South African news media with R300-R500 million annually for 3-5 years, citing an imbalance in shared values. The provisional report also targets Meta, X, and other tech giants, proposing remedies to restore news referral traffic and address misinformation. Parliament’s communication committee chair, Khusela Diko, welcomed the measures, highlighting their potential to benefit the SABC and other traditional media. The report also calls for removing search bias favouring foreign media, promoting local content, and increasing YouTube’s revenue share for media to 70%.
- Sasol’s interim results for the six months to December 2024 showed a 10% revenue decline to R122.1 billion and a 52% drop in basic earnings per share. The fuel division reported a R1 billion loss, while other segments like mining, gas, and US chemicals saw improved performance. Despite a negative free cash flow of R1.1 billion, cost management strategies helped reduce the deficit. CEO Simon Baloyi spoke of long-term progress, but the share price remains low with a forward PE ratio below three. Analysts note improved cash flow and cost controls but highlight challenges like rising net debt and no interim dividend.
- Old Mutual is facing a crucial period following the retirement of CEO Iain Williamson and ongoing market skepticism. Despite its large market cap, Old Mutual lags behind competitors like Sanlam and Discovery, with its share price underperforming. A major project, OM Bank, is seen as central to its recovery, but uncertainty around leadership has raised concerns. The company also needs stronger governance and a clear strategy, particularly to improve its mass-market and wealth management businesses, which face intense competition.
- As at the time of writing, the rand was 1% weaker against the dollar and the ALSI was 2.5% down for the week.
Sources: Dynasty, Business Report, BusinessLIVE, Reuters, New York Times, Moneyweb, Wall Street Journal, TechCentral, News24, The Daily Maverick, Bloomberg,?etc.
