As global stock markets tumble following US President Donald Trump’s announcement of widespread “retaliatory tariffs,” veteran economist Dawie Roodt warns that fears of a global and local recession are not without merit.
Trump imposed 30% tariffs on South Africa, calling the country one of the worst offenders.
“The JSE is in the red again today, the rand has taken a hammering, and the South African bond market is also under severe pressure,” Roodt said.
“Most equity markets around the world are under pressure, with huge losses being recorded. It’s not a pretty picture at the moment.”
Roodt notes that the uncertainty surrounding Trump’s erratic policy shifts is contributing significantly to the current market instability.
“Nobody really knows what he’ll do next. He might change his mind again tomorrow.”
He added that it will take time to regain market confidence, especially with international relations having “taken a knock.”
“This is a major shift—essentially the US versus the world. We’ll look back at this as one of the biggest financial upheavals since COVID-19. The world will look different after this.”
Roodt expressed concern over the potential for a global recession.
“Many economies, including South Africa, are already growing at a slower pace. The US might even dip into a recession. It’s not 100% clear yet, but the events of the past few days have definitely increased the chances of a global downturn.”
He singled out China as the country likely to be hit the hardest by the new trade restrictions.
“China is the biggest loser here. They export far more to the US than the US exports to them.”
Locally, South Africa is facing its own set of challenges.
“We’re on the losing end—not just internationally, but because of our own goals,” said Roodt, referencing the recent budget controversies and instability in the Government of National Unity (GNU).
“Our international relations with the US are deteriorating, and we’re cozying up to regimes that Trump dislikes.”
He didn’t mince words when it came to the ANC government’s handling of the economy.
“They’ve run it into the ground. Just look at Eskom. The outlook for local economic growth was already bleak—now it’s being revised even lower. A local recession is definitely a possibility.”
South Africa’s economy grew by just 0.6% last year. Roodt says that even a light headwind it might push us down to zero. He emphasizes a lot of this has to do with government failures – Trump is just adding fuel to the fire.
He also criticized the recent budget as “macroeconomically unsustainable.”
“Debt is getting out of hand. We’re spending far too much compared to our tax revenue. It’s been a bad budget for some time now, and the state needs to cut spending. That’s a political issue—while the DA wants to reduce spending, the ANC wants to increase it. The spenders won.”
Roodt also commented on Finance Minister Enoch Godongwana’s justification for the budget’s reliance on VAT increases:
“He said the middle to upper tier will absorb it, but the reality is that VAT is a regressive tax. It hits the poor hardest because they spend most of their income. The rich can save. The biggest bulk of VAT revenue will come from the rich, yes—but in relative terms, it hurts the poor more.”
On the political front, Roodt warned that jitters around the GNU could further harm the markets. “If the DA leaves the GNU, it’ll strengthen their position politically, but markets will react negatively.”
His advice to investors? Get a good financial advisor.
