Week in Review: Tariff Uncertainty Rattles Markets

U.S. stocks ended a turbulent week with losses, as ongoing trade policy uncertainty weighed on investor sentiment. Despite a strong Friday rebound—led by tech stocks that helped the Nasdaq surge 2.6%—the S&P 500 and Nasdaq both finished the week down over 2%, while the Dow posted a steep 3.1% decline, marking its worst weekly performance since March 2023.

Inflation data provided some relief, with the Consumer Price Index (CPI) showing a 2.8% year-over-year rise in February, a slowdown from January’s 3% increase. Core CPI, which excludes food and energy, also eased to 3.1%, its lowest annual increase since April 2021. Meanwhile, the Producer Price Index (PPI) remained flat for the month, with a 3.2% year-over-year rise. Both reports came in slightly below expectations, reinforcing hopes that inflationary pressures are easing.

Trade tensions escalated midweek as the U.S. imposed a 25% tariff on steel and aluminium imports. In response, Canada implemented its own 25% tariffs on U.S. goods, while the European Union announced plans to impose countermeasures on $28 billion worth of American products next month, though negotiations remain possible.

European markets also struggled, with the STOXX 50 Index falling 1.17% as investors worried about trade disruptions and monetary policy uncertainty. However, optimism around a potential Ukraine-Russia ceasefire and Germany’s increased state borrowing plans helped limit losses. In the UK, economic data disappointed, with GDP shrinking 0.1% in January. The FTSE 100 ended the week down 0.55%.

In Asia, Japan’s Nikkei 225 edged up 0.45%, supported by a weaker yen benefiting exporters, but trade concerns loomed as the U.S. considered 25% tariffs on imported cars—a major segment of Japan’s exports. Meanwhile, China’s stock markets posted gains, with the Shanghai Composite rising 1% on hopes for further stimulus, though Hong Kong’s Hang Seng Index dipped 0.9%

Gold hit a historic milestone, breaking past the $3,000 mark on Friday, as investors flocked to safe-haven assets amid economic uncertainty. Brent crude oil also rose 1%, settling at $70.5 per barrel as geopolitical tensions surrounding Ukraine remained in focus.

Looking ahead, all eyes are on the Federal Reserve’s upcoming policy meeting. The Fed is expected to keep rates steady at 4.25%-4.5% but will release updated economic projections that could hint at future policy moves. In the UK, the Bank of England is also anticipated to hold rates at 4.5%, while the Bank of Japan’s decision will be closely analysed for signals on future rate adjustments.

Market Moves of the Week:

The South African Reserve Bank’s Monetary Policy Committee (MPC) is set to meet next week, with most analysts expecting interest rates to remain unchanged at 7.50%. Policymakers remain in a cautious stance as global trade risks and ongoing budget challenges shape the economic outlook.

This week, Finance Minister Enoch Godongwana proposed a more modest value-added tax (VAT) increase in his revised 2025/2026 budget. For the first time since 2018, VAT will rise, generating an additional R42.5 billion over the next two fiscal years. The increase will be implemented in two phases—0.5 percentage points on May 1, 2025, and another 0.5 points on April 1, 2026—bringing the rate to 16%. The additional revenue is earmarked for education, healthcare, and public transport improvements.

Economic growth is projected to average 1.8% over the next three years, unchanged from October’s forecast. However, logistical bottlenecks, particularly within the country’s struggling rail and port systems, continue to weigh on output.

Debt remains a pressing concern, with South Africa currently spending R1.1 billion daily to service its obligations—amounting to R424.9 billion for the year. By the 2027/28 financial year, this figure is expected to climb to R478.6 billion (or R1.3 billion per day). The National Treasury now projects government debt will peak at 76.2% of GDP in 2025/26, higher than previous estimates. On Friday, Fitch Ratings expressed scepticism over the government’s ability to stabilize debt levels as outlined in the revised budget.

In the markets, the rand strengthened for the week, closing at R18.18/$, supported by record-high gold prices. However, the All-Share Index declined 0.74%, with losses across all three major sectors.

Chart of the Week:

Bloomberg’s new Global Trade Policy Uncertainty index confirms intuition that tariff confusion is radically higher now even than it was during Trump 1.0: The practical import is that it’s hard for companies to plan or to set prices under these conditions, while it grows very unwise for the Fed to do anything that might play into the rise in the price level that tariffs will initially cause.

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The views expressed in this newsletter are that of STRATEGIQ Capital, an authorised financial services provider (FSP 46624).