SARB’s Policy Pivot: 3% Target Signals Strategic Inflation Shift

In a landmark decision, the South African Reserve Bank (SARB) cut rates as expected but stole headlines by setting an explicit 3% inflation target. The move, aimed at bolstering long-term stability, marked a reversal from the previous tolerance of inflation closer to 6%. Analysts hailed the decision as bold and forward-thinking, with early signs of market support reflected in falling bond yields and resilient investor sentiment.

The new target is expected to anchor inflation expectations, strengthen the rand over time, and reduce volatility. However, the decision came just as geopolitical headwinds intensified…

US Slams South Africa with 30% Tariff as Trade Tensions Escalate

The White House confirmed a sweeping 30% tariff on all South African exports to the US, effective immediately. Washington cited SA’s foreign policy stance as a “national security threat,” while dismissing Pretoria’s negotiation efforts as “not ambitious enough.” The move places SA alongside Brazil, Canada, India, and Switzerland as tariff targets, with the US aiming to realign global trade to its advantage.

The Department of Trade, Industry & Competition responded swiftly, launching an export support desk to help businesses pivot to markets in Africa, Asia, Europe, and Latin America. But the risk to jobs and foreign investment remains high, as internal political tensions flare within South Africa’s Government of National Unity.

ZAR Depreciates Sharply as Markets Absorb Twin Blows

The rand weakened significantly, sliding past the 18.00/USD mark and hitting 18.22 at time of writing. Analysts noted the market had “pre-positioned” for the tariff shock, with most of the ZAR adjustment happening earlier in the week. Still, expectations remain bearish, with 18.4150 flagged as the next technical resistance. The recent SARB rate cut did little to shield the currency from global headwinds.

Bond Market Cheers Inflation Target, But Tariff Risks Linger

South African bonds rallied despite currency weakness, with the benchmark R209 yield hitting its lowest level since February 2022. Markets embraced SARB’s commitment to 3% inflation, viewing it as a step toward macroeconomic discipline. However, traders remain cautious about the longer-term fallout from US tariffs and their pass-through impact on inflation and growth.

Global Trade War: Trump Turns Up Heat on 187 Countries

President Trump’s administration hiked the average US tariff to 15.2%, up from 2.3% in 2024. The policy targets nations with trade surpluses, with Brazil facing 50%, Canada 35%, India 25%, and Switzerland 39%. Critical sectors like semiconductors and pharmaceuticals may face additional levies. Markets are grappling with the inflationary ripple effects, especially as the US Federal Reserve pushes back on near-term rate cut expectations.

Commodity Markets Roiled: Coffee Surges, Copper Whiplashed

• Coffee prices spiked as the US slapped Brazil with a 50% tariff. Though orange juice was exempt, markets remain jittery.

• Oil gained 6% on the week, boosted by Trump’s sanctions rhetoric against Russia and tariff drama with India.

• Copper traders were caught off guard after Trump exempted refined copper from tariffs at the last minute, killing the year’s most profitable arbitrage trade and triggering chaos at US ports.

China PMI Dips to 49.5 as Trade and Weather Weigh

China’s manufacturing PMI dropped below 50 for the first time since October 2023, signaling contraction. The July reading of 49.5 was driven by weak export orders and rising input costs—pressures linked to both trade tensions and extreme weather. With momentum fading, Beijing faces renewed calls to support growth through stimulus.