May 2025 Update

Making The News:  May 2025

   1. Tarrific News

In a setback for Donald Trump’s reform efforts, a US trade court declared that most of the recently implemented global tariffs were illegal. The White House announced plans to appeal this ruling, and the appeals court has allowed the tariffs to stay in effect while the legal process unfolds. his ruling specifically pertains to the reciprocal tariffs imposed for Liberation Day, as well as the tariffs on Canada, China, and Mexico. Notably for South Africa, the tariffs on foreign cars and steel and aluminium imports remain valid.

   2. US Downgraded by Moody’s

Moody’s has now joined the other two major rating agencies in downgrading the US from its AAA rating, a change that occurred in May, over ten years after S&P first took this step in 2011. The possibility of inflation spurred by tariffs, along with a stronger-than-expected jobs report in the US, has prompted investors to reduce their expectations for how many interest rate cuts the Federal Reserve is likely to implement this year.

   3. The One Big Beautiful Bill Act

The house passed trumps “big beautiful” tax and spending bill, which is estimated to increase the federal budget deficit by $2.4 trillion over the next decade. The Committee for a Responsible Federal Budget has emphasized that the legislation will probably lead to a rise in federal government debt by $3 trillion, potentially reaching around $5 trillion if it becomes permanent.

   4. A new SARB target?

After announcing the 0.25% rate cut, The SARB Governor, Lesetja Kganyago, promoted the idea of formally reducing the inflation target to 3% in a media address. According to the governor, this would result in South Africa being a low-inflation, low-interest rate country, which would bring with it economic growth. Additionally, lower inflation would ease price controlled costs such as electricity and fuel.

   5. Rand Strengthening

In May, the rand rose by 3.3% month-over-month, making it one of the top-performing major currencies against the US dollar. This positive performance was driven by improved geopolitical sentiment following the successful passage of a budget by the Government of National Unity after two previous attempts. Additionally, a highly anticipated visit by a diverse South African delegation of politicians, business leaders, and golfers to the White House for discussions with US President Donald Trump helped maintain a positive trajectory in US-South Africa relations.