President Trump’s ‘Liberation Day’ will forever be remembered for the market mayhem it unleashed. Few countries and assets were spared as the US applied a universal 10% tariff on all imports, with additional taxes for countries where the Trump administration felt there was unbalanced reciprocity. The world is now waiting to see who retaliates in this zero-sum game. Hold onto your hats!
Trump-tattered markets
A big risk selloff followed the latest round of Trump tariffs, with the S&P 500 (VOO-NASQ) notching its worst session since 2020. About $2 trillion was erased from the S&P 500 alone, with volumes mimicking rebalancing days. The risk that tariffs accelerate inflation and constrain growth has risen materially.
Tit for tat
Canada will put 25% retaliatory tariffs on US-made vehicles in response to the Trump administration’s import taxes on foreign vehicles, said Canadian Prime Minister Mark Carney. Bloomberg reports that the Canadian tariffs will apply to vehicles that aren’t compliant with the US-Mexico-Canada Agreement, and the “non-Canadian content” of cars and trucks that are assembled in the US under the rules of that trade deal.
Tariffs hit operating income
According to an estimate compiled by Bank of America Corp, about a third of the operating income of companies in the S&P 500 (VOO-NASQ) could be at risk if US trading partners respond with equal tariffs. The bank’s strategists also noted that “prolonged negotiations could stall activity spiralling into a recession”, reports Bloomberg. Even without any retaliation, they estimate that the cost of inflation from imported goods alone could reduce the operating income of S&P 500 companies by 5%.
Vehicle sales rev
In the rush to beat the torment of tariff-related price hikes on car prices, automakers around the world have pushed hard to drive sales. The likes of GM (GM-NASQ) are reporting a proper kick in vehicle sales ahead of potential tariffs with deliveries up +17% for Q1. In South Africa, NAAMSA vehicle sales delivered strong results ahead of the new wave of tariffs. New car sales were up 12.5% in March, with passenger car sales up a hefty 25%. Motus (MTH-JSE) brands were also up 25% in March, with Kia sales up +39%, Hyundai jumping +28%, and Renault up +8%.
Fashionably different
The owner of Calvin Klein and Tommy Hilfiger PVH (PVH-NASQ) kicked +18% on forecasts that were much stronger than expected. This performance is the exception, not the norm in a consumer world that has been extremely subdued of late.
Tariff troubles ahead
Many countries have seen tariff impositions of more than 10%, with SA’s discounted reciprocal tariff set at 30% – the EU got hit 20%, Japan 24%, India 26%, and 34% for China. Ouch! However, SA’s 30% tariff adds to the economic pain with the country expected to lose its US legislated AGOA benefits. SA vehicle and agriculture exports will likely be the hardest hit. As a result, South Africa is expected to see lower year-on-year GDP growth, at 1.3% from 1.8%.
JSE plunges
South African stocks plunged the most in five years as the budget debacle, and steep US tariffs on the country’s exports cloud the outlook for corporate profits and the economy. The FTSE/JSE Africa All Share Index fell as much as 4.5% in Johannesburg, its biggest drop since March 2020. Banks were the biggest fallers while other SA Inc. sectors, including telecommunications, personal care, retail and life insurance also took a hit.
Rand sheds value
The escalation in the trade war following Liberation Day increased risk aversion in global financial markets, which saw the rand spike to R18.95 to the US dollar as risk assets dropped, and markets worried over US rate cuts.
Sector focus: Previous metals
Precious miners dominate the top-performing slots in local markets this year, with Harmony Gold (HAR-JSE), Gold Fields (GFI-JSE), Anglogold Ashanti (ANG-JSE), Sibanye Stillwater (SSW-JSE) and Impala Platinum (IMP-JSE) taking up the top 5 slots, in that order.
