Tariff turbulence

Recently inaugurated US President Donald Trump has hit the ground running, issuing a record number of executive orders (more than 50 already) for a new president’s first 100 days. Covering everything from the status of trans people in the military and sports to foreign aid, Trump’s executive actions are meant to dramatically reshape the US’s foreign relations, economy, and domestic policy with a conservative, America-first agenda.

While Trump has appeared to mostly get it his way – with Congress already confirming some of his more controversial cabinet appointments and his decrees changing the face of federal government – he has also encountered legal resistance and backed down on some of his plans. Courts have, for example, stalled his efforts to downsize government and end birthright citizenship.

For investors, the Trumpian policies which may have the most impact are his stance on tariffs as well as his approach to international relations. Trump campaigned on a promise to leverage tariffs as a tool to drive US prosperity, even though most economists argue that tariffs could stoke inflation and dampen economic growth. Goldman Sachs estimates that every five percentage point increase in the US tariff rate could lessen S&P 500 earnings per share by about 1% to 2%.

Trump last Saturday declared that he would impose 25% tariffs on goods imported from Mexico and Canada (with the exception of energy products from Canada, which would face a lesser 10% tariff), and a 10% additional tariff on China. Over the weekend and on Monday morning, the S&P 500 and Nasdaq futures slumped as much as 2% as markets braced for the impact of the tariffs.

By late Monday, the S&P 500 closed only 0.76% lower and the Nasdaq ended the day down by 1.2%. Losses were rapidly pared back as Trump gave 30-day reprieves for Canada and Mexico after both countries made promises to strengthen their borders to address US drug smuggling and migration concerns. China received no such stay of the tariffs after imposing retaliatory tariffs of its own.

As we near the end of the week, the net outcome is that markets are more or less where they were as of Friday last week, with the S&P500 up 0.7%. After the shock and awe of the tariff announcements and the temporary reversals, investors have instead looked to metrics such as company earnings and the interest rate outlook to guide them. We have also had a few Magnificent Seven stocks claw back some of their losses following the DeepSeek shock.

The past week is probably a good indication of what we will see in the next four years. We can expect a bumpy ride as Trump wields tariffs as a threat to bring US trading partners into line. With Trump only giving a temporary reprieve to Mexico and Canada and still threatening tariffs against the European Union, we have almost certainly not seen the end of his tariff tantrums. He does, however, have a track record of backing down from tariff threats when they start to impact equities markets.

Trump is a disruptor who is likely to bring turbulence to the markets on a nearly daily basis. We believe that the key to successfully navigating through the next four years will be to watch what he does rather than what he says and to remain fixed on long-term outcomes. As bumpy as markets may seem, consumer spending remains solid, corporate earnings are positive, and the US labour market has been strong — which may help to buttress markets in the months ahead.

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“It is not necessarily the tariffs themselves that matter, rather the trade uncertainty that hits economic growth and investment intentions.”?

– Sharon Bell, European equity strategist at Goldman Sachs

“At this point, markets have a difficult time pricing to policy, so the focus is still on solid earnings, steady consumer spending and the economy still achieving a soft landing.”?

– Rob Haworth, senior investment strategy director with U.S. Bank Asset Management Group

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Global News

• Over the weekend, US President Donald Trump announced a levy of 25% on Canadian and Mexican imports, with tariffs on Canada subsequently halted for 30 days. Should Trump impose tariffs on Canada, 82% of Canadians support raising the price of oil exports to the US, according to a poll by Nanos Research Group conducted between 31 January and 3 February. The next few weeks will clarify the future of the US-Mexico-Canada trilateral trade bloc. On Tuesday, a US levy of 10% on Chinese imports became a reality, resulting in Beijing announcing it would impose retaliatory tariffs on a raft of American products, including 15% on coal and 10% on crude oil. Manufacturers are scrambling to secure shipments before the tariffs kick in.
• The EU is preparing for a transatlantic trade fight, although a delay in the implementation of tariffs in Mexico and Canada has increased confidence in the bloc that it will be able to negotiate an acceptable outcome. However, the EU hasn’t been able to establish good contacts in the nascent US administration, as some key trade posts in Washington are still awaiting Senate approval. The EU will also seek to defuse a brewing conflict with the US over steel and aluminium exports set to come to a head next month.
• India is moving to appease Trump to head off a potentially devastating trade war. In a matter of weeks, Prime Minister Narendra Modi has delivered a rapid series of concessions to the White House on issues core to Trump’s agenda, offering an early picture of how New Delhi plans to deal with the new president as he slaps tariffs on rivals and allies alike.
• The US Postal Service has resumed accepting packages from China and Hong Kong after briefly halting them due to Trump’s directive to end duty-free processing for smaller parcels. This swift reversal highlights the disruption caused by sudden trade policy changes, affecting businesses and delaying shipments. The new tariffs orders also close a loophole used by companies like Shein and Temu, to ship goods valued under $800 into the US without inspection or duties. Now, each package will require inspection, increasing costs that are likely to be passed on to consumers.
• Trump’s plan for the US to take over war-torn Gaza and create a “Riviera of the Middle East” after resettling Palestinians elsewhere has shattered US policy on the Israeli-Palestinian conflict and sparked widespread criticism from international powers. Subsequently, top administration officials are trying to soften elements of Trump’s proposal as it is being called a breach of international law by global leaders.
• Gold rallied as much as 1.4% to exceed $2,882.36 an ounce on Wednesday as trade-war worries bolstered safe haven demand and there were continued signs of short-term tightness in the market. It later lost some of its price after news that US allies expect Trump’s administration to present a long-awaited plan to end Russia’s war on Ukraine at the Munich Security Conference in Germany next week.
• US District Judge George O’Toole yesterday temporarily extended the deadline for millions of federal workers to decide whether to accept the Trump administration’s offer to resign with the promise of several months of full pay, as a legal challenge to the buyout initiative continues. This comes after reports that most employees at the US Agency for International Development (USAID) will begin administrative leave today. Those in “mission-critical” and “core leadership” positions will be exempt, according to a statement released on Tuesday. Employees stationed overseas must return within 30 days, though exceptions will be made on a “case-by-case” basis. According to a source familiar with the matter, over 50,000 employees, or about 2% of the workforce, had signed up for the resignation offer before the 6 February deadline.
• A federal judge has blocked Elon Musk from investigating the US Treasury. The court suspended Musk’s access to the agency’s payment system following accusations from a coalition of unions that the Treasury had unlawfully shared their members’ information with Musk’s team. On Thursday, US District Judge Colleen Kollar-Kotelly granted “read-only” access to two “special government employees” associated with Musk’s group. Although temporary, the order represents the first time a judge has imposed restrictions on the Tesla CEO’s activities connected to Trump.
• Musk’s team at the Department of Government Efficiency has been on-site at the Centers for Medicare and Medicaid Services to mine key systems for examples of what they consider fraud or waste, according to sources. They have gained access to payment and contracting systems. They have also been working to cancel diversity, equity, and inclusion-focused contracts at CMS and more broadly across the Department of Health and Human Services, including with organisations like Deloitte.
• Bank of England officials decided to cut interest rates by 25bps to a 19-month low, with two supporting a bumper 50bps cut, prompting markets to boost bets on further easing. The rate is now 4.5% and the cut is the third such reduction since August. The monetary policy committee signalled a “gradual and careful approach” to future rate cuts, suggesting in their forecasts that only two more reductions were needed to bring inflation back to the 2% target.
• French PM Francois Bayrou survived two no-confidence motions on Wednesday, assuring the adoption of a 2025 budget following months of political turmoil. France is on its third government since President Emmanuel Macron called snap elections last summer that fractured the National Assembly into three roughly equal and opposing blocs. Lawmakers toppled the previous prime minister, Michel Barnier after he tried to force through a budget using the same provision.
• Travel and spending during China’s Lunar New Year holiday hit new records this year, giving the government an encouraging boost as it seeks to ramp up the ailing economy. A total of 501 million trips were made within China during the eight-day travel season, which began on 28 January, according to data released by the Ministry of Culture and Tourism on Wednesday. This represented a 5.9% increase from the same period last year, while tourism spending surged 7% year-on-year. Average spending showed a modest increase on last year, although about 5% lower than the pre-pandemic level.
• China’s antitrust watchdog is laying the groundwork for a potential probe into Apple’s policies and the fees it charges app developers, part of a broader push by Beijing that risks becoming another flashpoint in the country’s trade war with the US. The State Administration for Market Regulation is examining Apple’s policies, which include taking a cut of as much as 30% on in-app spending and barring external payment services and stores, according to sources.
• China’s Ministry of Finance placed PVH, which owns Calvin Klein and Tommy Hilfiger, on its “unreliable entities list,” essentially a blacklist of companies. It was part of a broad package of economic measures the Chinese government announced targeting the US following Trump’s implementation of 10% tariffs on all Chinese imports.
• Novo Nordisk expects sales to surge again this year as the Danish drugmaker builds supply for blockbuster diabetes medicine Ozempic and obesity treatment Wegovy. Revenue will likely grow by 16% to 24% at constant exchange rates, the company said on Wednesday. That compares with 26% for last year. The shares climbed as much as 6.3% in Copenhagen trading after the forecast and better-than-expected results. (Novo Nordisk is a holding of the Fundsmith Equity Fund, one of our preferred active managers).
• Google parent Alphabet’s shares dropped as much as 8.9% in New York on Wednesday after slower growth in its cloud business contributed to lower-than-expected revenue in the fourth quarter. Quarterly sales, excluding partner payouts, were $81.6 billion. Analysts had projected $82.8 billion, according to data compiled by Bloomberg. Alphabet announced $75 billion in 2025 capital expenditures, far exceeding the $57.9 billion that analysts expected. Investors have urged Alphabet to demonstrate that it is maintaining momentum across its businesses as it spends more heavily on AI.
• AMD shares tumbled as much as 11% to $106.50 after markets opened in New York on Wednesday after its disappointing outlook for its data centre business, an area where it’s struggling to catch up with AI computing leader Nvidia. The division will grow by a percentage in the “strong” double digits this year, AMD said on a conference call with analysts, predicting that the second half would be better than the first.
• Shares of Nvidia gained as much as 5.4% on Wednesday and 7.2% for the week after a key partner, Super Micro Computer, said its new AI data centre systems, powered by Nvidia’s advanced Blackwell chips, are now ready to ship. The news worked to ease some concerns around Nvidia’s supply chain constraints, which the chipmaker itself has raised as a challenge in the rollout of its more advanced AI chip.
• OpenAI unveiled a ChatGPT tool called “deep research” on Monday, ahead of high-level meetings in Tokyo as China’s DeepSeek chatbot heats up competition in the AI field. OpenAI said its new tool “accomplishes in tens of minutes what would take a human many hours”. At a meeting on Monday in Tokyo between OpenAI CEO Sam Altman and Japan’s Prime Minister Shigeru Ishiba, Ishiba said his country is committed to developing AI in conjunction with the US.
• Cosmetics giant L’Oreal is selling a $3.1 billion stake in Sanofi back to the French drugmaker, cashing in part of its holding after Sanofi’s shares outperformed the market over the past year. After the sale, L’Oréal will own 7.2% of Sanofi’s share capital, down from about 9.4%, and 13.1% of its voting rights. The sale of the Sanofi shares will “optimise” L’Oreal’s balance sheet following recent acquisitions and further diversify its financing sources. (L’Oreal is also a holding of the Fundsmith Equity Fund).
• As at Thursday’s close the S&P 500 was 0.6% down for the week

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Local News

• President Cyril Ramaphosa used his first State of the Nation Address under the Government of National Unity (GNU) to outline sweeping measures to turn around the embattled local government sector. He admitted last night that in many cities and towns across the country, roads were not maintained and water and electricity supply was often disrupted. Ramaphosa said part of the problem was down to the existing design of local government, a sign that the GNU is about to embark on systemic reform of municipalities rather than surface-level issues.
• Ramaphosa earlier this week addressed concerns over “misinformation and misunderstanding” following Trump’s announcement that he would withdraw funding from South Africa over the so-called “racist” Expropriation Act – a claim later echoed by his ally, Musk. Ramaphosa clarified that no land had been confiscated and expressed his intention to engage with Trump to promote a better understanding of the policy, which aims to ensure fair public access to land. DA leader John Steenhuisen also weighed in, stating that the act does not permit arbitrary land seizures by the state. In response to Trump’s statement, the rand immediately weakened, surpassing R19 to the dollar by midnight on Monday, although it has since recovered to around R18.40/$.
• Government will embark on a visa digitisation programme to make it easier for skilled people to invest in the country and to grow tourism. Ramaphosa announced in his State of the Nation Address in the Cape Town city hall last night that government would launch the electronic travel authorisation system to enable a secure, fully digital, visa application process. The system will use AI and automation to reduce the scope of corruption and enable rapid turnaround times for tourist visas.
• South Africa’s draft five-year strategic growth plan sets an ambitious economic growth target of up to 5.4%, notably excluding the National Health Insurance (NHI) scheme. The blueprint anticipates accelerated reforms over the next five years, focusing on infrastructure development and easing fiscal pressures. Steenhuisen praised the removal of the NHI from the plan, suggesting it allows for a thorough review of its funding before any changes to medical aids are made. In his State of the Nation Address last night, President Cyril Ramaphosa outlined 10 key economic goals for South Africa, which you can read here.
• Health Minister Aaron Motsoaledi informed parliament that the Trump administration’s freeze on US foreign aid threatens over 15,300 healthcare jobs in South Africa, including doctors, nurses, and technical experts, primarily in HIV/AIDS-affected districts. To sustain HIV programmes, South Africa requires R7.5 billion – R4.6 billion for staffing and R2.9 billion for operations.
• The private sector started 2025 on a weak footing, as business conditions deteriorated sharply in January, according to the latest S&P Global SA purchasing managers’ index (PMI). The PMI fell to 47.4, down from 49.9 in December, marking its lowest level since July 2021. A sharp drop in client demand was the key driver behind the contraction, the ratings agency said. Absa’s PMI fell 0.9 points to 45.3 in January, the third consecutive month of contraction and the lowest level since August 2024. 50 is neutral.
• IMF’s economists calculate that South Africa could add 1.8 percentage points to its annual economic growth rate over the medium term, and 1.5 percentage points to annual job growth, as well as cut inequality, with a package of reforms that would close the gap with its emerging market peers. This includes removing burdensome and costly government regulations and high regulatory obstacles.
• The mining industry continued to feel pressure last year as lower commodity prices across the board, apart from gold, and logistical challenges resulted in lower profitability among miners and caused some 12,000 job losses, Minerals Council economist Hugo Pienaar said, speaking at the Investing in African Mining Indaba conference in Cape Town, on Monday. Mining contributed 6% to GDP in the first three quarters of 2024. This was down from 6.3% in 2023.
• The Minerals Council of South Africa cautioned that the local mining sector is falling behind its African peers in terms of exploration and investment attractiveness. Minerals Council CEO Mzila Mthenjane said on Wednesday that the surge in dealmaking in African mining is an opportunity for South Africa to capitalise on its mineral endowment through business-friendly exploration regulations.
• South Africa has the critical mineral resources and the know-how to assemble lithium-ion batteries for electric vehicles and stationary storage that could create additional revenue of R16 billion a year in the electrical machinery industry. Over the long term, South Africa has the capacity to establish a lithium-ion manufacturing facility with a production capacity of 5,000Mwh, potentially generating about R6.75 billion in revenue a year. This is according to a study of the potential of developing critical minerals, recently carried out by the Council for Mineral Technology.
• Anglo American has assured investors it will divest from its diamond business to concentrate on copper and iron ore mining. However, selling De Beers is proving difficult amid a sharp decline in diamond prices. De Beers delayed price reductions until late last year and when it finally capitulated in December, the cuts were seen as too little, too late. Meanwhile, Anglo American expects to complete the unbundling and London listing of Anglo American Platinum (Amplats) by mid-year. Amplats expects a significant drop in headline earnings for the year to end December because of lower PGM prices. Headline earnings per share are set to decrease between 36% and 46% compared to last year.
• Anglo American and Sasol have signed a joint development agreement to promote renewable diesel production using degraded mines owned by Anglo subsidiary De Beers. This aims to pilot the production of feedstock, starting with solaris – a nicotine-free variety of tobacco – and moringa plantations to create vegetable oil, which can be used to produce renewable diesel using Sasol’s existing technology and assets.
• Capitec expects annual earnings to surge more than a quarter from a year earlier, thanks to continued improvement in credit impairment charges and credit loss ratios. It said headline earnings per share for the year to end February will gain 28% to 32% year-on-year. The positive trend in credit impairment charges and credit loss ratios observed in the second half of the 2024 financial year carried over into the 2025 financial year.
• Although Pick n Pay and Boxer returned what parent company Pick n Pay described on Tuesday as “steady like-for-like sales improvement from the Pick n Pay segment and another strong performance from Boxer Retail” for the 45 weeks to 5 January, the retailer continues to face significant challenges. Group sales overall gained 3.6%, with Boxer being the star in the portfolio and reporting gains in sales of 11.4%. Pick n Pay shares soared 4.82% in late afternoon trade on Tuesday, with Boxer gaining 1.55%.
• As at the time of writing, the rand was 1.3% stronger and the ALSI was 2% up for the week.

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Sources: Dynasty, Moneyweb, Business Report, AFP, Bloomberg, CNN, BusinessLIVE, BBC, New York Times, Daily Maverick, News24, Engineering News, etc.