President Trump’s “reciprocal” tariffs have hit the global economy with force, imposing a steep 104% levy on China and targeting 60 trading partners with new taxes. Markets are reeling, tumbling under the strain and heaping pressure on the White House and Republicans. With mid-term elections two years away, the party’s nerves are fraying—an economy in decline rarely paves the way to victory. Shifting to constructive negotiations could steady markets, ease the sell-off, and temper opposition to the tariffs. For now, the situation remains a tense, unpredictable mess—Republicans steel themselves for the fallout as Trump’s trade overhaul risks pulling the economy, and their political fortunes, further into turmoil.

While the world is quite rightly focused on Trump’s tariffs and the disruption it is causing, SA has more localised developments to contend with. On the GNU front, the latest is that the coalition faces tension but will persist for now. After the DA opposed the budget law, the ANC’s leadership opted to engage all parties rather than expel the DA. Positively,  ANC and DA leaders have emphasized commitment to the GNU but demand clearer rules and genuine power-sharing. The DA has challenged the budget in court, with a hearing set for April 22, and will decide its role post-ruling, asserting its 22% voter mandate to prioritize economic growth and jobs. So, for now, the GNU remains, but is far from steady.

ZAR Markets

The GNU’s fragility casts doubt on its future, and the ZAR’s performance reflects these domestic uncertainties more than global developments at the moment. The ZAR has been one of the worst-performing EM currencies, and for good reason. While global risk aversion has escalated recently, local issues surrounding the GNU have weakened SA’s risk profile significantly. Optimism around the GNU’s ability to implement much-needed reforms is fading fast. The USD-ZAR is thus trading well above pre-election levels, and looks set to test all-time highs around 19.92 in the coming days.

Global FX Markets

China’s yuan weakened to a 19-month low of 7.3505 against the U.S. dollar on Wednesday, driven by escalating trade tensions with the U.S. after President Donald Trump imposed 104% tariffs on Chinese imports, effective at 12:01 a.m. ET. The offshore yuan hit a record low of 7.4288 overnight before recovering slightly to 7.3812, up 0.62%, following a more than 1% drop. The People’s Bank of China set the yuan’s midpoint rate at 7.2066, its weakest since September 2023, allowing it to trade down to 7.3507, though it intervened by selling dollars to curb sharper declines. Analysts see this as an attempt to balance export support—where a weaker yuan helps—against risks of capital outflows and financial instability. The yuan’s depreciation follows a loosening of controls by China’s central bank amid the trade war, with forecasts suggesting it could hit 7.7 by Q3 if tariffs escalate further. Both onshore and offshore yuan have lost over 1% this month, reflecting fears of economic fallout from the U.S. tariffs.