Stock markets are plummeting due to fears that an escalating trade war under the Trump administration could stunt economic growth and spark a recession. However, it is worth noting that these trends predate Trump’s policies, aligning with the expected end of a business cycle as the Federal Reserve normalises monetary policy. By shrinking its $5 trillion pandemic-era balance sheet with Quantitative Tightening, the Fed has raised market interest rates to curb inflation, which is still above its 2% target. Selling bonds to reduce its balance sheet has flooded the market, raising yields and pressuring GDP growth and equities. The signs were there through 2024, long before Trump had taken power, but this downturn has been worsened by Trump’s tariff plans and looming civil service cuts.

On the local front, there are reports that the GNU has still not reached a compromise concerning the budget. Speculation is mounting that the DA remains steadfast in rejecting a proposed 2% VAT increase. The DA might support a smaller adjustment to VAT, contingent on the ANC abandoning its policy of expropriation without compensation—a condition the ANC appears unwilling to meet. Meanwhile, the EFF could back a VAT hike if the ANC excludes the DA from the GNU, but the ANC is not prepared to consider that possibility either. As things stand, the risk of another budget postponement remains, with any agreement potentially delayed until the final hour. This uncertainty casts a shadow over South Africa’s economic outlook, signalling deep ideological and operational rifts within the GNU that could further unsettle market sentiment.