How U.S-China Trade War impacts on SA and emerging markets

The first shot of the China – US went off without much of a reaction, however, the tension has now escalated raising questions of possible impact of the trade-war on South Africa and other emerging markets. Trade-wars have a history of hitting the most vulnerable markets, SA included.

The trade-war is bound to put pressure on emerging economies and currencies leading to inflations. The effects of the trade-war are already in place as emerging markets face economic pressures. According to Merriam Isa on Fin24, “the real trade war bloodbath took place in the second-to-last week of June, with emerging market currencies taking a beating worldwide – including the rand which weakened nearly to R14 a dollar from a peak earlier this year at R11.50.”

The trade war has led to oil prices increasing, and it has been noted that there is a causality between movement of the rand and oil prices – this has been the case since 1990.  South Africa will not be as affected, in comparison to other emerging markets.

South Africa depends on trade for its growth, hence changes in trade conditions could have a negative impact. South Africa exports steel and alluminium, which Trump has also imposed tariffs on. South Africa’s application for exemption from alluminium and steel tariff was rejected – it costs South African exporters an estimate of R3bn Engineering Industries Federation of Southern Africa (Seifsa) on Fin24.

 

By: Kgothatso Nkanyane

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