South Africa’s Markets Defy Expectations Amid U.S. Tensions

South Africa’s markets are behaving strangely, showing unexpected strength despite growing tensions with the United States.

Renowned economist Dawie Roodt has noted that, given the recent executive order from U.S. President Donald Trump, one would have expected the rand to weaken and local equity markets to decline.

Instead, the rand strengthened, and the JSE Top 40 Index reached an all-time high in February.

So, what’s happening?

Trump’s Trade Pressure on South Africa

The United States has recently criticized South Africa’s:
Expropriations Act
Black empowerment policies
Race-based economic rules

As a result, President Donald Trump signed an executive order freezing aid to South Africa, and more actions may follow.

Possible consequences include:
Loss of AGOA benefits, which provide South Africa with tariff-free access to U.S. markets.
Tariffs on South African exports to the U.S., including precious metals and vehicles.
Potential sanctions if South Africa does not comply with U.S. demands.

South Africa exported R157 billion worth of goods to the U.S. in 2024, while importing R120 billion, meaning a R36 billion trade surplus could be at risk.

Why Are South African Markets Rising?

Under normal circumstances, these developments should have triggered a market downturn, but the opposite has happened.

The rand has strengthened from R18.99 to R18.37 against the U.S. dollar.
The JSE Top 40 Index surged, reaching a new high.

Roodt believes this strange market reaction could mean investors expect South Africa to reach a deal with the Trump administration.

Similar to past trade conflicts with Canada and Mexico, Trump’s aggressive approach initially caused market concern, but those countries ultimately agreed to U.S. demands.

South African investors may be anticipating a similar resolution, with the government conceding on some U.S. demands rather than risking economic turmoil.

What’s Next for South Africa?

While markets seem optimistic, the real test will be South Africa’s response to U.S. trade threats.

Key questions remain:
Will South Africa fight to keep its economic policies intact?
Or will it make concessions to maintain trade benefits with the U.S.?

Either way, the unexpected market confidence suggests that investors believe a trade war will be avoided—for now.

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