| The podcast to this newsletter can be listened to here Markets and Economics RSA: US Tariffs Threaten South African Exports: The United States has announced new 30% import tariffs that pose significant risks to South Africa’s economy, particularly industries reliant on US trade. This could hurt key export sectors and worsen the trade deficit. Despite that, the JSE is still holding up well compared to it’s US counterpart.  This has a lot to do with the weakening of the US Dollar relative to its international peers. This has been the driving force behind the surge in Resource stocks, which have a meaningful weight in the All Share Index. As at the end of July, resource shares gained 46.7% to drive the ASLI 19.3% higher. Despite the US tariffs, there is still a positive Political and Market Response to the Government of National Unity, especially as they are seen to be tackling crime and corruption. Having spent millions on commissions of enquiry, it would be nice to see some prosecutions finally coming out of that, too. Following the formation of a multi-party Government of National Unity (GNU) after national elections, investor sentiment has improved, and Cobie and I have followed it closely, especially in the podcast. The big challenge going forward is to find other markets for exports that were going to the US. They might wake up to the fact that even with the tariff, the landed cost is worth it – but can exporters wait and see if that happens? While inflation had been moderating in early 2025, increases in food and petrol prices have recently driven headline CPI slightly higher, with food import prices a particular concern. The South African Reserve Bank (SARB) is expected to respond cautiously as the inflation environment remains volatile. The next CPI print is due on the 20/8. Our inflation trajectory changed in 2020, and we’ve done a pretty good job of keeping it under control, to the extent that the SARB are now looking at a target number of 3% rather than the range they have used in the past. (The US also uses a target percentage – still at 2%). The graph below shows the US v RSA inflation since January 2020.  Least we forget, there has been little loadshedding in the last year, and the renewables drive is still rolling out. (With Eskom, having been saved by the rollout of renewables last year, now trying to make us pay for that as well. This is disguised as a ‘connection fee’ – the next phase is to go off-grid.) In the US: New Tariffs Announced: President Trump signed an executive order imposing new tariffs of 10% to 41% on imports from roughly 70 countries, set to go into effect August 7. This move prompted market volatility, signalled protectionist policy escalation, and risks further global trade tension. Weak July Jobs Report: We touched on this briefly in our newsletter last week, but there has been more fallout since then, and we go into more detail below (anchor). The July payrolls report showed only 73,000 new jobs added—far below expectations—and significant downward revisions for prior months (May and June). This points to a rapid labour market slowdown and increased recession risk. Economists now see a 50% or greater chance of recession as hiring momentum collapses and consumer sentiment weakens. Major Stock Market Swings: Equities experienced sharp declines after the tariff announcement and poor jobs data, with the Dow dropping over 600 points at one point. Key indices ended the week slightly higher, but volatility increased due to economic uncertainty and corporate earnings releases. Are recession fears justified? Multiple indicators—weak job growth, declining factory orders, disappointing consumer spending data, and decreasing housing market activity—have combined to heighten fears of a recession. The media loves this, but we’re not panicking, just watching. The FED have effectively warded off recessionary warnings in the past decade with QE, and they have significant leeway to drop interest rates ( which has not always been the case in the past). Economists and strategists note a possible turning point driven by weak fundamentals and “policy missteps”. Doubt Cast on Economic Data Independence: The firing of the head of the Bureau of Labour Statistics, Erika McEntarfer, by President Trump following the weak jobs report has raised concerns about the politicisation and future credibility of official economic statistics, undermining investor and analyst confidence. Rest of the world New Tariffs and Intensified Global Trade Tensions: The ripple effects of the recently announced U.S. tariffs are being felt across world markets, triggering a series of retaliatory or pre-emptive moves. Germany saw a dip in industrial output after companies rushed to beat new tariffs, while exports temporarily rose. The uncertainty is affecting business investment and global supply chains, particularly as Europe considers countermeasures and negotiations continue between China, the EU, and the U.S. Resilience and Divergence in World Economic Growth: The IMF’s latest outlook projects global GDP growth at 3.0% for 2025, with an upward revision due to front-loading (companies exporting ahead of new tariffs), some successful easing of trade restrictions, and improved financial conditions. However, regional divergence persists: India’s services sector hit an 11-month high thanks to robust exports (but has other headwinds,), while Europe and China face mounting challenges—Europe battling stagnation and China remaining vulnerable to deflationary pressures and weak consumption. Japan’s Stock Market Surges on Trade and Earnings: Japan’s TOPIX and Nikkei indices reached new records, supported by strong domestic corporate earnings and a degree of optimism following the announcement of a trade deal with the U.S. Auto manufacturers. UK Housing Market: British house prices rose by the most in six months in July, indicating a possible stabilisation after a period of declines. The increase in mortgage approvals and easing inflation have supported sentiment, but risks remain due to higher interest rates and ongoing uncertainty. There are signs that the Uk is done dropping interest rates for now, perhaps for the rest of the year. China’s Trade and Economic Adjustments: Chinese soybean imports hit a record high in July, reflecting support from strong Brazilian exports (formerly from the US) as well as ongoing trade uncertainties with the U.S. China continues to bolster ties with Latin America and ASEAN while negotiating landmark trade deals with global partners such as the UK and Taiwan. The nation, however, is still managing persistent challenges, including sluggish consumer demand and a difficult property sector.  Firing the messenger Last week, Trump fired the BLS (Bureau of Labour Statistics) chief Erika McEntarfer, but before looking at the possible impact of this move, let’s look at whether the criticism that has been levelled against the department is justified. The immediate issue that led to this firing was around the non-farm payrolls print, which not only came in way too low for Trump’s sensibilities, but to add insult to injury, the previous two months were revised considerably lower.  It is common for the BLS to revise its initial nonfarm payroll reports as more complete data comes in. These revisions, sometimes large, reflect delays in survey responses from employers, especially in public sectors and smaller businesses. The recent downward revisions of hundreds of thousands of jobs for earlier months sparked controversy, although such updates are a typical feature of the BLS’s methodology aimed at improving accuracy over time. However, the scale of some revisions has raised questions about the precision and reliability of the initial numbers. It is important to note that the BLS has experienced budget cuts and staffing reductions (thanks to DOGE), which have strained its capacity for thorough data collection. Declining survey response rates also affect data quality. These challenges have led to concerns about how well the BLS can maintain its traditionally high standard of employment data accuracy going forward. After a disappointing July 2025 jobs report showing only 73,000 new jobs, President Trump publicly accused the BLS and its commissioner of manipulating data for political reasons and called the report “rigged.” This accusation culminated in the firing of the BLS commissioner. However, experts and former officials emphasise there is no evidence supporting intentional political bias or data rigging in the reports. They stress that the revisions are part of the normal statistical process, and the BLS operates independently within the Department of Labour. The BLS uses surveys and statistical models (including a “births-deaths” model) to estimate employment among small businesses, where direct data is less available. This approach can lead to estimation errors, especially during economic turbulence or rapid change. Critics argue this affects the accuracy of monthly payroll estimates, as seen in recent large benchmark revisions comparing BLS data to tax records. Despite all these issues, the solution is not to fire the messenger. The data produced is central to the decisions made by the FED, Treasury and businesses around the globe who (try to) trade with the US, and the answer is more resources, not less. The other major indicator that the BLS is responsible for is CPI. Originally, CPI was a cost-of-goods index based on a fixed basket of goods. Over time, it evolved into a cost-of-living index that accounts for changes in consumer behaviour and product quality. Critics argue this change allows for methodological adjustments that may understate inflation, portraying a lower CPI than what some believe reflects true inflation. CPI attempts to account for consumers substituting cheaper goods when prices change, but critics contend the formula used for aggregating price data does not fully capture substitution behaviour at all levels. This can result in an upward bias in the inflation rate reported by about 0.4 percentage points annually, according to some assessments. The BLS makes quality adjustments to account for improvements or changes in products over time. Critics say these hedonic adjustments may arbitrarily estimate how much value consumers derive from new features, potentially distorting CPI downward. However, evidence suggests these adjustments have only a very small impact on overall CPI, often increasing it slightly rather than lowering it. Historical and ongoing debates revolve around whether CPI overstates inflation due to ignoring consumer substitution, quality changes, and new goods, or understates it due to methodological biases and political pressures. Some experts say CPI is a lagging indicator and does not fully capture current inflation dynamics, such as commodity price changes. The BLS faces public criticism often fuelled by misunderstandings, including accusations that it lowers CPI intentionally or that certain methodological choices reduce government payment obligations like Social Security adjustments. Official responses emphasise the use of rigorous, objective methods intended to improve accuracy and adherence to international standards. Right now, the accusation is that the CPI is artificially high (pick a side, MAGA). More recent issues include cutbacks in data collection that may impact reliability and fears over the politicisation of economic data after staff changes, which can undermine public trust.  Bonds, Statistics and Politicisation. A $2 trillion market for securities linked to US inflation data could be the first area of Treasuries that would crack if the US Bureau of Labour Statistics is politicised, according to bond investors. Remember that inflation, certainly at these levels, is a new ‘problem’ that US investors are having to contend with. Since President Donald Trump fired BLS chief Erika McEntarfer on Friday following a jobs report that showed unemployment rising on his watch, investors have fretted that the unprecedented move could erode trust in government data. Even before Trump’s outburst, questions were being raised about how long America’s “gold standard” system for economic data could withstand his effort to centralise power by collapsing firewalls meant to protect independent agencies.  The result of that happening to the BLS could be catastrophic when it comes to asset prices. Indeed, the dismissal and the scrutiny that awaits her replacement and the agency’s subsequent actions may have already done irreparable damage.Once trust is lost, it is very hard to win it back. Where this is being felt most acutely is in Treasury inflation-protected securities, where the face value of a bond is adjusted based on the consumer price index, which is calculated by the BLS. Interest payments are based on the floating principal. US price growth is very much in the spotlight, with a July CPI report due next week and economists expecting both annual headline and core readings to remain above the Fed’s 2% target. While Trump has persistently called for the Federal Reserve to cut interest rates, there are signs his tariffs are reigniting inflation.  |
| We are about to discover whether Reed Smoot and Willis Hawley were right all along. Reed Smoot (1862–1941) was an American politician and businessman, best known as a U.S. Senator from Utah who served from 1903 to 1933. He was also an apostle in the Church of Jesus Christ of Latter-day Saints (aka Mormon). Smoot is most famously remembered as the co-sponsor of the 1930 Smoot–Hawley Tariff Act, which raised American import duties on many goods and is often cited as a factor that worsened the Great Depression. His tenure also featured a notable controversy over his eligibility to serve in the Senate due to his religious role and the Church’s history with polygamy. Smoot was influential in government finance and public land issues and served as chairman of the Senate Finance Committee.  Willis Chatman Hawley (1864–1941) was an American politician and educator from Oregon. He served 13 terms in the U.S. House of Representatives from 1907 to 1933. Before his congressional career, he was president of Willamette University and an expert on tariff and tax law. Hawley co-sponsored the Smoot–Hawley Tariff Act of 1930 alongside Reed Smoot. He chaired the House Ways and Means Committee and was known for his fiscal expertise and support of tariff policies aimed at protecting American industries, especially agricultural interests. Together, Reed Smoot and Willis Hawley gave their names to the Smoot–Hawley Tariff Act of 1930, a protectionist trade law that substantially increased U.S. tariffs on thousands of imported goods, which had significant economic consequences during the Great Depression. Donald Trump said he was a protectionist, and he has delivered effective levies to match the infamous tariffs named for the Depression-era US legislators. That’s illustrated by Capital Economics:  That is also the shape of the new Trump trade policy, which now looks likely to stay in place at least for a matter of months, and possibly much longer. If we are indeed at the new trade normal, conventional wisdom has been proved wrong on at least three important points: Tariffs are far higher than expected in January (or after the April 8 delay).They have had very little effect on inflation or unemployment to date – YET. (The current level of circa 4.2% is considered effectively full employment. )Virtually nobody has retaliated -YET.The latter two have counteracted any damage that might have been done by the first. Judged by his ability to get what he wants, the story so far is of a crushing success for Trump. Others are not fighting back. Neither the markets nor the macroeconomic data to date place any limit on his freedom of action — the US stock market remains very close to its all-time high. Tariffs are also producing helpful revenue for the government. So far, things are going far better than they did for Smoot and Hawley, who passed their levies in 1930 and were both ejected from Congress in 1932 (there’s still time). That protectionist episode came when the US had a trade surplus, and was bedevilled by widespread retaliation as the Depression deepened. This time, the conditions are better. This is a policy in which Trump deeply believes, and it has taken no little political skill to enact it. He has completely bypassed Congress and done these tariffs by executive order, like any other self-respecting dictator. Now we need to find out if it works. Economic logic is remorseless, but it’s not like physics; it operates through the decisions of millions of people and can take years to play out. Markets follow the economy in the long term, but in the shorter term, they can get things wildly wrong. Case study of markets following the economy: The Global Financial Crisis (GFC) was caused largely by huge overinvestment in US housing. The bubble in homebuilders’ stocks peaked in 2005, and in house prices a year later. The stock market surged on for another year, and the crash wasn’t until 2008. As a side note, I spent several months in the US in 2007 (In St Louis, Missouri- not exactly the most exciting destination in the US), and the start of the subprime crisis was all over the news every day – but the markets took another year to pay attention. (Remember that anyone in the US with a pulse was being given mortgages at below prime, with the interest rate only increasing years later, in the belief that house prices would keep going up and they could sell and get some equity before paying the higher rate. These dodgy mortgages were then bundled and sold as AAA-rated investments.)  This time around, the new system should be inflationary for the US, which effectively has a new consumption tax, and deflationary for everyone else globally, as their industries have just been rendered less competitive. And it should slow economic activity for everyone. If it does bring back manufacturing, that will take time and reduce tariff revenues. That isn’t to say that the shock will be anything like as bad as the disaster of 2008 — but the experience to date, with companies bringing imports forward to avoid tariffs, doesn’t prove that protectionism will work out better than it did for Smoot and Hawley. Lower growth expectations bolster the case for rate cuts, while US company profits are rising, likely to benefit from a cheaper dollar and unhindered by retaliatory tariffs. All of that suggests that US equities can endure in a Smoot-Hawley world — at least until the logic has played out in full. The effect of devaluation of the dollar on their imports and exports: You can see from the DXY chart, the dollar has been gradually devaluing since Trump’s inauguration, with the steepest drop since the so-called Liberation day ( but has since levelled off – we might see more movement now that the Tariffs appear to be in place – there has been some indication of this in the last couple of days).  * When the U.S. dollar is devalued (its value falls against other currencies), American-made goods and services become cheaper for foreign buyers. This means that companies and consumers outside the U.S. need less of their own currency to buy a given amount of U.S. products. * As a result, demand for American exports increases because they are more competitively priced abroad. This is music to Trump’s ears. * In real-world terms if the dollar drops in value by 10%, U.S. exporters often see an increase in export volumes, though the response can be slow and depends on the type of goods and market dynamics. * On the other hand, when the dollar devalues, it takes more dollars to buy the same amount of foreign goods. Imported products like electronics, oil, and cars become more expensive for U.S. consumers and businesses. This is before the tariffs! * This usually leads to a reduction in demand for imports, as foreign products cost more. The tariffs will make that a double whammy. * For example, a weaker dollar makes foreign vacations and imported food pricier for Americans.The typical goal of devaluation is to boost exports and shrink imports, improving the U.S. trade balance. Tariffs also have this objective. * However, the impact is not always immediate or symmetrical. Exports react to devaluation, but often slower and less strongly than imports react to appreciation; factors like market information and supply capacity play a role. * Import prices rise, but the change is not always proportional to the dollar’s movement, due to factors like pricing strategies and long-term contracts. We’re in wait-and-see mode. It is clear, though, that small and medium businesses are having to pass on tariff costs to consumers. Even large companies are folding on their ‘choice’ to pass on tariffs ( as suggested by Bessent) For the year 2025, Ford projects tariff-related expenses to reach approximately $2 billion to $3 billion, a figure that has been revised upwards during the year due to sustained tariffs on imported vehicles, steel, aluminium, and auto parts.  Why is a trade surplus a problem? A trade surplus, where a country exports more than it imports, can bring economic benefits but also poses several potential problems. Trump usually frames this as other countries “ripping off” the US. Is this really the case? The US does run a trade surplus with a few countries: the Netherlands, Hong Kong, Brazil, Singapore, Australia, and the United Kingdom. Let’s look at this objectively: Currency Appreciation: A trade surplus often causes the national currency to strengthen due to increased foreign demand for exports. While a stronger currency might sound positive, it can make the country’s exports more expensive and less competitive internationally, and imports cheaper. This can eventually reduce export demand and hurt domestic industries. Dependence on Exports: Heavy reliance on exports for economic growth can make the economy vulnerable to external shocks. If global demand for exports falls, the surplus country might face economic slowdowns and difficulties compensating for domestic demand. Inflation Risks: A trade surplus may lead to higher domestic inflation if demand outpaces supply within the country. Rising prices can erode consumer purchasing power and destabilise the economy. Of course, tariffs, Trump’s solution to this ‘problem’, will have the same effect. Trade Protectionism and Political Tensions: Persistent trade surpluses can provoke retaliatory trade barriers like tariffs from trade partners who run deficits with the surplus country. This can escalate into trade disputes and global trade tensions, harming long-term international economic relations. Ah! Interesting…Let’s see if anyone does retaliate? It would probably require multinational cooperation. Economic Imbalances and Over-reliance: A continuous trade surplus can create imbalances with deficit countries, potentially leading to debt issues and reduced consumption or living standards domestically compared to a balanced trade situation. This is one of the reasons China is focusing so heavily on increasing domestic consumption. Natural Resource Depletion: Countries whose exports rely heavily on natural resources risk degrading those resources through over-extraction to maintain the surplus. This continues to be a problem, especially in Emerging nations. A case study in tariff absurdity- Switzerland To appreciate the absurdity of what is happening, look only to Switzerland, about to suffer a 39% tariff — the highest on any developed nation — as punishment for its big trade surplus with the US. First, note that the surplus is relatively new, and entirely driven by a sudden boom in Swiss exports (largely gold bullion to the US earlier this year- see the blip in the graph below). It has nothing to do with any great limitation on US exports to Switzerland, and the Swiss have little to offer because tariffs are already minimal:  Further, the Swiss franc’s safe-haven status makes it one of the world’s most highly valued currencies. The dollar has depreciated by 20% over the last decade, making imports from the US far more competitive. The US has widely complained about non-tariff barriers, and particularly about artificially weak currencies. There is no way this charge can stick to the Swiss:  Switzerland is now scurrying to find something to offer, here’s the US’s shopping list • Gold (leading export, valued at about $104 billion) – they refine it, not produce it. • Pharmaceuticals, especially packaged medications and vaccines (around $42.4 billion and $37.4 billion, respectively) • Chemical products and organic chemicals • Watches and clocks (highly significant in Swiss exports) • Precision instruments, including medical, optical, photographic, and measuring devices • Machinery and mechanical appliances • Jewellery and precious metals, including imitation jewellery  Weakening BRICS The BRICs nations are in Trump’s cross-hairs. The threat to impose additional tariffs on India for buying oil from Russia is unsurprising. Brazil, now the subject of a 50% tariff, incurred Washington’s wrath for its “unfair” treatment of former president and Trump ally Jair Bolsonaro (who is now under house arrest, so it hasn’t helped him). Before that, an accusation of white genocide in South Africa put the Rainbow Nation in the president’s crosshairs and left a 30% tariff on its exports to the US. Given Trump’s newfound scepticism toward BRICS, despite his poor understanding of it, it’s unlikely that they will receive any clemency. Regarding Brazil, judging by Trump’s tough stance even toward Indian Prime Minister Narendra Modi — a supposed ally — he is likely to set a high bar for any concession from President Luiz Inacio Lula da Silva. This antagonism threatens to erode confidence in emerging markets and potentially unravel a trade that had gained traction as a viable alternative to the increasingly vulnerable US exceptionalism narrative. Particularly for Lula and Modi, under domestic pressure not to look weak, there is also a real risk of retaliation. JPMorgan’s index of emerging market currencies posted its worst monthly performance since November, snapping a rally that had survived months of tariff turmoil and rising US rates. The relationship between Treasury yields and EM is upside down. Usually, rising yields are a bigger problem for emerging markets than they have been this year. This dynamic could persist as long as US real interest rates (relative to inflation) stay low. While tariffs create a headwind for all emerging markets, some countries will have particular problems. BCA Research’s Rajeeb Pramanik points out that an effective embargo on purchasing Russian crude oil will hit India’s balance of payments and currency. This likely makes Indian fiscal and monetary policy more restrictive, and shrinks corporate profits. Which is a problem, as it’s the only global stock market that is arguably even more expensive than the US:  OIL Meanwhile, OPEC+’s decision to boost supply, just as Trump intensifies diplomatic pressure on Russia, is a potential double-edged sword. Since May, the cartel has agreed to add more than 2 million barrels per day, in addition to non-OPEC+ producers’ capacity, to absorb all the new demand this year and next. This has probably knocked $13 off oil prices since April, a relief for consumers, and for central bankers and protectionist politicians hoping to avoid renewed inflation. For the global economy, an abundant supply is a blessing. Yes, it only shifts incomes from producers to consumers, but that transfer tends to fuel higher spending and activity. If demand weakens, that tells a darker story — not of a future boom, but an economic slowdown. On the other hand, public finances of oil-exporting nations face a budget squeeze from lower prices. That could spill over into credit risk premiums if producers struggle to rake in enough to meet their debt obligations, and could push companies to scale back expansion plans. One of Trump’s rallying cries was ‘drill baby drill’ – he positioned himself as the saviour of high oil prices, and oil prices are coming down – but it has nothing to do with drilling any more, it has everything to do with the Middle East. Last weekend’s OPEC+ meeting that agreed to pump more oil into an oversupplied market lasted barely 20 minutes, indicating broad consensus. It drove the oil price further below the level before Israel’s June attacks on Iran triggered a brief conflict that sucked in the US. That swift decision has already had far-reaching consequences as the US has imposed up to 50% secondary tariffs on India. This was in direct retaliation for India buying oil from Russia. Interestingly, India is not just rolling over, perhaps taking a leaf out of Mark Carney’s book? “We reiterate that these actions are unfair, unjustified and unreasonable,” a spokesperson for the Indian Ministry of External Affairs said in a statement. “India will take all actions necessary to protect its national interests.” Notably, Trump hasn’t imposed similar penalties on other major buyers of Russian crude — including China — or on Russia itself, and has delayed implementation by three weeks, signalling this is leverage, not policy. The price could spike if India eventually complies, and the tariff threat would probably not have been made without the supply hike to keep prices manageable. Saudi Arabia’s push for a supply increase to appease Trump by bringing down prices is no secret. However, with India’s defiance prompting Trump to slap on an additional 25% tariff, it’s not clear that Prime Minister Narendra Modi can call Washington’s bluff or broker a deal. A lot is at stake for him. Cheap Russian oil provides decent savings for Indian refineries, and Modi is unwilling to lose India’s traditionally close relationship with the Kremlin. The additional tariff could cut India’s US-bound exports by about 60%, dragging GDP lower by 0.9%. That would be concentrated on such items as gems and jewellery, textiles, footwear, carpets, and agricultural goods — all labour-intensive industries. The analysts suspect this might be a negotiation tactic. While alternative concessions could be offered in place of Trump’s exact demands, uncertainty persists. Other factors to consider are whether other oil producers would increase their output to offset reduced Russian supply, and finally, whether the tariff remains in place. A muted reaction in markets to the announcement suggests many think it will not. There’s otherwise little sign of additional supply in the near term. The cartel’s spare capacity is not infinite. For now, weak demand clouds the outlook and discourages additional US drilling. Slowing growth in key economies, suggested by China’s manufacturing contraction and weak US labour market data, tempers hopes for strong oil consumption. Oil majors lament the constraints that an abundant supply puts on their operations. In particular, low oil prices tend to mean problems for exploration and production companies, which the White House would like to “drill, baby, drill”: Cheaper oil is a victory for Trump, but he can’t say the same about getting more drilling in the US. Both the International Energy Agency and the US Energy Information Administration have bolstered their estimates for next year’s surplus, making new exploration even less economically viable. The two forecasters expect supply to eclipse demand by the most since the pandemic. That notwithstanding, US crude inventories for the week ending Aug. 1 dropped by 3 million barrels, more than the 0.6 million that analysts expected. Falling inventories usually mean strong demand, but that could change if the balance between the US, China, Russia, and India unravels. Prices reflect a fragile balance between geopolitical pressure and market fundamentals. Author: Dawn Ridler  Empire … nearly lost In politics, seeing the wood for the trees is sometimes difficult. Let’s take the play at home into consideration. The US has become concerned about the plight of the Afrikaner, and despite a visit by the SA contingent to the White House, 30% tariffs are in order. This has unleashed a public fight for who is actually to blame for the tariffs. Opinions are divided on this. Are Afriforum and similar organisations, after recent visits to the US, the culprits, or is the broad failure by the ANC to blame? I note, though, that this is not a unique situation. Last week, Trump lambasted India for buying cheap Russian oil, which they repackage to sell at a profit, according to Mr Trump. In a tweet, he suggested that the Indians don’t care how many Ukrainians are dying in the Russian War and that further tariff hikes are on their way.  What about Brazilian tariffs? As of August 2025, the United States has imposed a 50% tariff on most Brazilian imports. This new tariff, came into effect with the stated objective of addressing what the U.S. government described as “extraordinary threats” to its national security, foreign policy, and economy, as well as concerns about political prosecutions in Brazil, particularly regarding former President Jair Bolsonaro. And then there is Russian sanctions which the US is hoping to dial up after a last ditch effort by Steve Witkoff (special US envoy for peace) to bring a peace deal to the Ukrainian/Russian conflict. The point is that the US hasn’t all of a sudden become concerned about the Afrikaner plight at the bottom of Africa. The tariffs are a direct result of the US imposing their stronghold on economies it considers unfriendly to its cause. That, by the way, isn’t just South Africa and its BRIC counterparts but also others such as Switzerland, now contending with 39% tariffs on their exports. The US knows that they have shifted from Monetary Policy driving growth to Fiscal dominance to create stability. It’s the answer required to deal with the ballooning debt they are facing. Think back to the US in the 1940’s. Fiscal dominance ruled the roost as the US was financing their effort in WW2. From the creation of war bonds to the mandatory employment of citizens to drive a singular effort… victory. The FED was under the control of the Treasury and kept interest rates artificially low to help finance the war effort. It was only in 1951 when the Treasury-FED accord allowed monetary policy to slip back into the driving seat. This is the world we know … where the FED is independent and targets employment and price stability. But we are moving further away from this. President Donald Trump recently nominated Stephen Miran, the current Chairman of the Council of Economic Advisers, to fill a newly vacant seat on the Federal Reserve Board of Governors. This appointment is temporary and will last until January 2026, which is when the previous governor, Adriana Kugler’s term was supposed to expire. Miran’s confirmation by the Senate is pending. The world can see the tension between President Trump and FED chair Jerome Powell because the FED board won’t reduce interest rates. Their reasons are solid for a committee which still believes the world is run by monetary policy. At the same time, Erika McEntarfer, the commissioner of the U.S. Bureau of Labour Statistics (BLS), was fired by President Trump following the release of a disappointing jobs report. The report showed that the U.S. economy added only 73,000 jobs in July, significantly fewer than expected, and it included large downward revisions to job gains in May and June, reducing previously reported numbers by 258,000 jobs. Anything that shows that “Put America First” isn’t working as well as hoped stands the risk of being sidelined. Enter Fiscal dominance! People who lived through an era of fiscal dominance are at least 75 years old today. And if you are old enough to have lived through it as a policymaker you are probably dead today. So, for the most part, people don’t know what Fiscal dominance requires. Debt refinancing is critical. I have written about this in the past, and it involves the creation of new debt to refinance old debt. Low interest rates help greatly here. The second is to protect and control your territory. This is why the current US dispensation is desperate to onshore manufacturing and production again. This involves direct talks with corporations but also using tariffs as a stick to punish countries that are not friendly to a vulnerable USA. Apple’s commitment $2.5 billion to the likes of Corning to manufacture iPhone screens in the US last week is a good point in case. The US geographically is well protected by oceans, and for this reason, the US is happy to pull back from its military dominance globally. They just cannot afford it anymore. The Iranian nuclear strike had a far deeper meaning than merely assisting Israel in its war efforts. The US was telling the world that it can strike from a home base in places that previously required a military presence in the area. The B2 Stealth bombers used in the offensive came from an air force base in Missouri rather than from a US base abroad, such as the one they have in Qatar. The US pulling back from its military presence globally will leave a vacuum, and the question is who and what will take its place? China will dominate. They are slowly becoming the powerhouse that will challenge US dominance. Their technology can rival US-built alternatives and where they lag, they will catch up. Why am I so certain? The US is built not only on immigration but also on bright and able individuals wanting to live in the greatest nation on earth. They populate their universities and drive cutting-edge ideas that have made the US a leader for decades. These attributes are slowly being switched off. If taken to its fullest conclusion, the US will lose their edge. As the 1940s ushered in the Nifty Fifties, which was generally a time of technological discovery and prosperity, the question is what will today’s fiscal dominance by the US usher in? Only the fullness of time will tell us this. In the meantime, the tariffs we are contending with in South Africa today have a lot more to do with the US debt pile than it has with the ruling party’s world view or the plight of the Afrikaner. Author – Cobie Le Grange EXCHANGE RATES:  The Rand/Dollar closed at R17.74, (R18.15,R17.76, R17.72, R17.90, R17.58, R17.89, R17.99, R17.92, R17.77, R17.95, R17.88, R18.04, R18.16, R18.39, R18.64, R18.89, R19.12, R19.10, R18.36, R18.21, R18.18, R18.20, R18.71, R18.35, R18.38, R18.41, R18,67, R18.38, R18.73, R18.03, R18.05, R18.11, R18.21,)  The Rand/Pound closed at R23.84 (R24.09, R23.88, R23.76, R24.22, R24.08, R24.49, R24.22, R24.35, R24.05, R24.18, R24.14, R23.95, R24.16, R24.40, R24.82, R25.10, R25.01, R24.73, R23.78, R23.55, R23.52, R23.50, R23.53, R23.19, R23.12, R22.85, R23,16, R22.93, R22.80, R22.99, R22.98, R22.72, R22.99, R22.73, )  The Rand/Euro closed the week at R20.64 (R21.04, R20.86, R20.61, R20.93, R 20.70, R20.91, R20.74, R20.68, R20.24, R20,37, R20.27, R20.13, R20.43, R20.78, R21.21, R21.52, R21.72, R20.93, R19.95, R19.72, R19.83, R19.72, R19.41, R19.20, R19.29, R19.02, R19,35, R19.31, R19.23, R19.09, R18.87, R19.19, R18.85, ,)  Brent Crude: Closed the week $66.07 ($69.46, $68.29, $69.21, $70.58, $68.27, $67.39, $77.27, $74.38, $66.56, $62.61, $65.41, $63.88, $61.29, $65.86, $67.72 $64.76, $65.95, $72.40, $72.13, $70.51, $70.33, $73.03, $74.23, $74.51, $74.65, $76,40, $77.60, $79.98, $71.00, $72.38, $75.05, $70.87, $73.86, $73.99).  Bitcoin closed at $118,043 ($113,608, $118,139, $118,214, $117,871, $108,056, $107,461, $103,455, $105,017, $105,643, $104,049, $103,551, $104,615, $96,405, $94,185, $84,571, $84,695, $82,661, $83,074, $84,889, $82,639, $83,710, $85,696, $96,151, $96,821, $96,286, $99,049, $104,559, $104,971, $99,341, $97,113, $97,950, ). Articles and Blogs: How to survive volatility in your investments NEW What to do when interest rates drop NEW Difficult Financial Conversations Financial Implications of Longevity Kick Start Your Own Retirement Plan You matter more than your kids in retirement To catch a falling knife Income at retirement 2025 Budget Apportioning blame for your financial state Tempering fear and greed New Year’s resolutions over? Try a Wealth Bingo Card instead. Wills and Estate Planning (comprehensive 3 in one post) Pre-retirement – The make-or-break moments Some unconventional thoughts on wealth and risk management Wealth creation is a balancing act over time Wealth traps waiting for unsuspecting entrepreneurs Two Pot pension system demystified Keeping your legacy shining bright Financial well-being when dealing with Dementia and Alzheimers Weathering the storm Pruning your wealth farm Should you change your investments with changing politics? Taking a holistic view of your wealth Why do I need a financial advisor? Costs Fees and Commissions The NHI and what to do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |