South African rand has taken a hit after President Donald Trump threatened to impose additional tariffs on BRICS-aligned countries, including South Africa.
Trump’s comments on Sunday sent the rand down 1% to 17.7450 against the dollar, paring some of its recent gains.
Trump warned that countries aligning themselves with BRICS’ “anti-American policies” would face an extra 10% tariff, with no exceptions.
“Countries aligning themselves with what he called the ‘anti-American policies’ of BRICS will be charged an extra 10% tariff, adding that there will be no exceptions to this policy,” he said.
Annabel Bishop, Investec’s chief economist, noted that the additional 10% tariffs would drag on South Africa’s export competitiveness.
“The additional 10% BRICS tariffs would add further drag to South Africa’s export competitiveness,” she said, predicting the rand would remain volatile for the rest of the month and early August.
South Africa is negotiating a trade deal with the US to exempt key exports like autos, auto parts, steel, and aluminum from tariffs in exchange for buying liquefied natural gas from the US over 10 years. ETM Analytics believes South Africa still has a significant bargaining position, particularly in the mining industry and rare earth minerals.
“South Africa still has a significant bargaining position if one focuses on the mining industry and some of the rare earth minerals that the country can provide over and above its position as the world’s largest platinum producer,” they said.
The Johannesburg Stock Exchange’s Top-40 index was down 0.1%, while South Africa’s benchmark 2035 government bond yield rose 9.5 basis points to 9.835%.
Reuters
