The ZAR is starting the week firmly on the defensive and trading back above the 19.0000 handle this morning. The
USD index has surged on the news of the Trump administration’s imposition of blanket tariffs on Mexico, China and
Canada. Canada and Mexico have vowed to retaliate immediately, standing up to the US, and will now need to
weigh their options. The response from both Canada and Mexico will, to some degree, nullify the actions of the US.
However, that will probably not deter the Trump administration from purposely trying to encourage home-grown
production.
Stock markets will likely plunge following the US’s actions and risk appetite will nosedive. We know from the
DeepSeek experience last week that stock markets are sensitive and vulnerable to a sell-off, and this week, the
stock market’s resolve will be tested further. The ZAR is not being singled out as much as it’s going along for the
ride. It will be powerless in these global FX market swings, and investors will need to turn their attention abroad to
gain a fresh perspective on what the currency might do and where the risks lie. It is clear that another global trade
war has begun, and countries will look after their affairs to ensure that whatever fallout follows will be mitigated.
That will imply leaning on other trading partners to offset trade agreements, looking internally at efficiencies to
mitigate inflationary effects, and focusing on fiscal policies that will render countries more sustainable over the long
term. Geopolitically, this will likely embolden other groups of countries on the African continent and within BRICs to
look at alternative trading mechanisms to see how they can reduce their reliance on the USD. While Trump has
actively warned countries, including those in the BRICs from doing so, most countries will now feel justified and
emboldened due to the recent stance of the US.