In one day, US President Donald Trump threatened three key partners – China, Canada, and Mexico – with tariffs over illegal immigration and fentanyl. These threats combined with the tit-for-tat tariff response by Canada and Mexico were enough to send stock markets across the world into the red.

Then Mexico made a surprise concession. Mexico’s President, Claudia Sheinbaum, agreed to deploy troops to the border and enter negotiations. As a result, Trump announced he would delay the 25% tariffs on Mexico by one month. The reaction on Wall Street was immediate, with some stocks reversing their losses. Then shortly after the US and Canada agreed to a similar 30-day trade truce to negotiate. So, Trump’s threats seemed to have paid off in the short term. Well, that is in the case of Canada and Mexico.

China on the other hand, hasn’t backed down…

In response to Trump’s blanket tariffs of 10% on Chinese goods, which took effect yesterday (Tuesday), China retaliated with tariffs on specific US goods.

These include a 15% tax on certain types of coal and liquefied natural gas, and a 10% tariff on crude oil, pickup trucks and agricultural machinery. 

And they commenced on 10 February.

Additionally, China announced new export controls effective immediately on more than two dozen metal products and related technologies. These include tungsten, a critical mineral typically used in industrial and defence applications, and one which China controls 80% of world production.
Overall, these initial tit-for-tat tariffs are relatively modest compared to Trump’s first term. 

According to Capital Economics, “Chinese tariffs target at most $20 billion of the country’s annual imports from the US, about 12% of the total, which is “a far cry” from the more than $450 billion in Chinese goods being targeted by the US”.

How long will these tariffs last?

I’m not sure. And I don’t think anyone is willing to hazard a quess. 

What is certain is Trump wants talks with China to reach a trade deal soon, as well as work together on issues, such as the war in Ukraine. We may see talks over the next month or so.

If talks don’t materialise, then expect the trade war to escalate with more and higher tariffs.

SA is also under Trump’s microscope…

At the same time Trump threatened Canada, China and Mexico, he managed to give SA some “love”.

More specifically, Trump threatened to halt funding due to the updated Expropriation Act, which President Cyril Ramaphosa signed in January.
And yup, these threats triggered a sell-off in the rand, which weakened past R19/$, and the JSE, which fell over 1%. However, both recovered well on Tuesday.

It also triggered various responses from SA organisations and opposition parties – and even from Ramaphosa, himself.

According to Bloomberg, the US has sent more than $8 billion (R150 billion) in bilateral aid to SA over the last two decades.

Ramaphosa added that US funding to SA is limited to US President’s Emergency Plan for Aid Relief (PEPFAR), which accounts for around 17% of SA’s HIV/Aids programme.

While all aid is crucial, the reality is, ending this funding isn’t an “economy-destroyer”. The bigger problem for SA is if Trump ends the African Growth and Opportunity Act (AGOA).

AGOA provides preferential access for about 20% of SA’s exports to the US. Consider in 2024, SA exported $6.5 billion worth of goods to the US under AGOA.

It’s a big deal for SA’s economy and one we can’t really afford to lose.

Last year, the Biden administration extended AGOA until December 2025. But, I wouldn’t be surprised if Trump ends AGOA if he doesn’t like what he hears when both countries meet to talk.

Doing so would substantially cut SA’s total exports hurting businesses, weaken the rand, drive inflation and unemployment higher.