Important South African sectors at risk

Under United States President Donald Trump’s policies, the mining, manufacturing, and automotive sectors face significant barriers, leaving investors and local businesses uncertain.

PSG Wealth’s chief investment officer, Adriaan Pask, said Trump’s so-called ‘Liberation Day’ tariffs, announced in early April, significantly complicate matters for local businesses and investors.

He explained that the tariffs, which range from 10% to 50% across more than 100 countries, were announced with a speed and severity that caught markets off guard. 

“While the underlying issues President Trump seeks to address – such as the erosion of US domestic industry and the imbalance in global trade – may hold some merit, the execution has been blunt and counterproductive,” he said.

Pask explained that “we are not dealing with measured or consultative policymaking” regarding Trump’s tariff policies.

“Normally, tariffs are preceded by diplomatic dialogue, gradual implementation and consideration for the ripple effects across economies,” he said. 

However, in this instance, that process was entirely bypassed. “Instead, we’re seeing a jarring shift that undermines predictability – a core requirement for long-term capital investment and business planning,” he said.

Some of the tariffs Trump announced in April are paused for 90 days, but their announcement has left businesses and investors worldwide uncertain.

South Africa, in particular, now faces a 30% tariff – a full five percentage points higher than local policymakers expected. 

Pask explained that although South Africa makes up only 2.50% of US imports, nearly 9% of our exports go to the United States. 

“In rand terms, that amounted to roughly $13 billion in 2023, about 2.10% of our GDP. That’s a significant exposure for our economy,” he said.

He further explained that most of these exports are in mining and manufacturing, precisely the sectors the US is trying to shield. 

“Aluminium and steel, two industries central to South African exports and US tariff policy, now face major barriers,” he said. “These sectors alone account for around 30 basis points of our GDP.” 

In addition, Pask warned that South Africa’s automotive industry is in the firing line. 

He used BMW’s Rosslyn plant as an example, pointing out that 97% of X3 models sold in the United States are made in South Africa. These units are now subject to a 25% tariff on vehicles and parts.

Investing during tariff turbulence

Pask emphasised that this issue is not just about macroeconomic growth or inflation. “The reality is that tariffs directly impact specific businesses and industries,” he said. 

“For South Africa, the immediate challenge is how to maintain competitiveness in sectors now facing artificially inflated pricing abroad,” he said. 

“And for investors, it’s about identifying which companies are resilient enough to withstand these shocks.”

He said Trump’s tariffs are a reminder to investors of the fragility of market confidence in the face of policy missteps. 

“The scale and pace of these measures have sparked sharp reactions, wiping out trillions in equity value within days and creating confusion across global supply chains,” he said.

For example, the European Union faces 20% tariffs, sparking internal debate and preparations for countermeasures. 

In addition, Vietnam was hit with nearly 50% tariffs, while China is at the centre of the storm and is engaged in a full-blown trade war with the United States. 

“It’s difficult to disentangle trade policy from broader strategic rivalry. In China’s case, the measures clearly go beyond economics and reflect deeper anxieties about the future balance of global power,” Pask explained. 

“While Chinese growth has moderated, it still far outpaces much of the developed world. And as it narrows the gap with the US, tensions are likely to intensify.”

While Trump has paused some tariffs, Pask explained that, from an investment perspective, this creates a particularly volatile environment.

He said markets are swinging on news flow, with large companies seeing their share prices jump or drop 10% based on a single headline. 

In this context, Pask warned that constructing a portfolio around specific tariff outcomes is risky and unrealistic.

“Instead, the best course is to maintain diversification and flexibility. Tariffs, particularly those introduced in an unpredictable manner, can distort price signals and earnings expectations,” he said. 

“But if you have a clear understanding of a business’s intrinsic value through the cycle, these selloffs can create attractive entry points.”

He pointed out that the markets experienced similar volatility during Trump’s first term, with trade wars and market turbulence dominating headlines. 

“Yet those years passed, tariffs were rolled back, and markets adjusted. It’s important not to overreact to short-term noise or try to predict policy turns with precision,” he said.

“For long-term investors, the guiding principle should remain unchanged: buy quality businesses at reasonable valuations and hold them through the cycle.” 

“Recessions will come – sometimes prompted by external shocks like these tariffs – but they are part of the normal economic rhythm. Political uncertainty, too, is an ongoing feature of global markets.”

Therefore, staying focused on fundamentals and being patient is often the most effective strategy.