As we predicted at 80eight, the ZAR shot back above R18.20 to the USD on two developments over the last week – the imposition of 30% tariffs on US imports from SA, and the 25 basis points reduction in interest rates. It has since strengthened to around R18/USD.

The reduction in interest rates to 7% was already priced into the financial markets (lower interest rates make ZAR bond yields less attractive). What was less certain was the impact of US tariffs. These, clearly, were not priced into the markets as there remained an outside hope that SA would negotiate a better deal.

ZAR-USFD exchange rate

We see potential for some consolidation around these levels but longer term the risks to the ZAR remain. There is potential for further penalties against SA, particularly should the US start targeting SA politicians and enterprises deemed to be politically problematic (EFF leader Julius Malema, deputy president Paul Mashatile and perhaps even President Cyril Ramaphosa, to name a few). US President Donald Trump has threatened BRICS countries with a bigger stick since this emerging bloc represents a threat to US imperial ambitions and to the USD - however exaggerated these threats may be. 

Trump has shown himself capable of making good on threats like these. Consider the case of Brazil which, despite running a trade deficit with the US, was facing a 50% tariff because they were prosecuting ex-President Bolsonaro (a Trump fan) for an attempted insurrection. In the end, Brazil got a 10% tariff. It’s hard to know what the logic is here.

XA Global Trade Advisors neatly summarises what the tariffs mean:

SA ended up with a 30% “Liberation Day” tariff for all goods except:

• precious metals and critical minerals (gold, platinum, etc), which attract no duty.
• those already covered by the section 232 National Security tariffs. These are 50% on steel, aluminium, and from today, copper, plus 25% on cars unless they are imported from the UK which attracts 10% for the first 100 000 vehicles.

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