Maarten Ackerman, Citadel Chief Economist

A “decade’s worth of reform in weeks” is how Citadel Chief Economist Maarten Ackerman describes the pace and impact of United States (US) President Donald Trump’s sweeping tariff policies on global and South African (SA) markets, alongside the tougher US stance on SA. “Economically, two themes are taking centre stage - Trump’s tariffs and the unstable diplomatic relationship between SA and the US, despite President Cyril Ramaphosa’s recent visit to the White House,” the top economist says. He cautions that it is still unclear whether strained relations will show signs of improvement following a tense meeting between Trump and the SA delegation, led by President Ramaphosa, in the White House.

A NEW ERA OF ECONOMIC HEADWINDS FOR SA AND THE WORLD

“With Trump threatening blanket tariffs, the tailwinds that the global economy once enjoyed are rapidly becoming headwinds,” says Ackerman. On 2 April 2025, Trump announced a 90-day tariff pause for all countries except China, ending in early July, while a 90-day pause for China kicked in on 14 May 2025.

“When Trump came into office, his main agendas – tariffs and immigration– were potentially growth-negative, meaning they could negatively impact US growth prospects and increase inflation as well as impact global markets and geopolitics.”

Ackerman cautions: “After the last quarter, we have cut our global growth forecast for the next 12 months by over 0.8%, taking it from 2.5% to 1.7%. At the beginning of the year, indicators suggested that the risk of a global recession was in the low 20%. Those indicators have now increased the risk to around 50% and as we all know, if the US goes into a slowdown, the rest of the world will quickly follow. The markets have been spooked.”

He adds: “High-frequency data like the Purchasing Managers’ Index (PMI) is showing that economies are already responding to Trump’s tariffs, the US PMI was running close to 55, then moved down, and hit 47.8 by 1 May 2025.” Ackerman believes that the US slowdown will hit global demand, depress commodity prices, and hurt emerging markets like SA.

SA-US RELATIONS STRAINED AMID TRADE TURMOIL

“The first quarter of 2025 also saw the deterioration of SA’s diplomatic relationship with the US,” says Ackerman, referring to the expulsion of Ambassador Ebrahim Rasool, controversies involving Iran, Hamas and anti-Israel sentiment, and claims of a ‘white genocide’, which Trump confronted the SA delegation with, in video format in the Oval Office.

“The culmination of these issues could result in US trade restrictions against SA, unless they reach a mutually beneficial agreement, especially in terms of the exchange of minerals and energy, and agricultural products,” Ackerman notes.

A glimmer of hope emerged when Ramaphosa offered a trade deal to Trump during a press briefing, in an attempt to ease tensions. Ramaphosa said the two countries had agreed to discuss a trade and investment proposal that included buying liquefied natural gas from the US and selling critical minerals to the US.

This development may signal a willingness from Pretoria to rebuild economic bridges, particularly as the African Growth and Opportunity Act (AGOA) agreement expires in September. “While the US is not our largest trading partner, it is an important one, with 8% of our exports destined for its shores,” says Ackerman. “Of that 8%, a third is excluded from tariffs but citrus exporters are likely to be hardest hit.”

The outcome of trade talks between the US and China is an issue to watch closely, says Ackerman. “If China’s economy slows, demand for SA’s resources and agricultural products will fall. China is SA’s largest trading partner, and this ripple effect is unavoidable.”

STRUCTURAL REFORMS CRUCIAL TO STABILISE GROWTH

Amid these external threats, SA must urgently fix its own house first, says Ackerman. “Despite the heavy tax burden being levied on consumers, the economy is not growing. Low growth is further exacerbated by high interest rates,” cautions Ackerman. “Economic strain could result in social unrest, which the country cannot afford.”

The only solution, says Ackerman, is reform. “SA needs solid, sustained economic growth. The country therefore must urgently implement reforms which were again cited in the Budget 3.0, while keeping the GNU intact to preserve political stability.”

With current growth projections slashed to 0.75% over the next 12 months, Ackerman emphasises the urgency: “If we can keep progressing with the reforms that have been tabled, like increased private participation in the country’s electricity supply, and get the reform of our rail and port system back on the table, we could see SA’s growth climbing to around 3% per annum.”

CONCLUSION: WEATHERING THE STORM

“This is a volatile time in the markets,” Ackerman concludes, “but Trump’s policies may present us with excellent investment alternatives. The world has gone through many crises, what they all have in common is that they create environments where fear and emotion take over, creating opportunities for disciplined investors. Our philosophy of diversification, hunting for value, expecting uncertainty, and prioritising asset allocation, is more critical than ever.”