Trump Uncertainty Shakes Global Economy
The global economy is at risk of cracking under the onslaught of Donald Trump’s policies and could reignite inflation, South Africa’s central bank chief warned.
“Global uncertainties abound,” Lesetja Kganyago told Bloomberg Television’s Jennifer Zabasajja on Tuesday, ahead of a Group of 20 meeting in Cape Town this week. “There are question marks about whether inflation can surge again and whether central banks are compatible.”
Finance ministers and central bankers gathered Wednesday and Thursday under siege from the actions of the U.S. president, who has rattled financial markets with near-daily tariff threats since returning to the White House last month.
“Tariffs are a risk to the global economy and the global disinflation process,” Kganyago said. “A year ago it wasn’t something we were worried about because it didn’t exist. Now that it’s here, we have to take it into account.” This has been a big boost for gold prices, amid concerns about tariffs and Trump’s policies, making gold a safe haven asset.
South Africa’s central bank cut borrowing costs by 25 basis points to 7.5% last month, but warned that a trade war could hurt inflation and prompt the central bank to reverse recent interest rate cuts.
In addition to clouding the outlook for price pressures, Trump has frozen most aid to South Africa after falsely claiming the country was confiscating land. South African authorities have not seized any private land since the end of white minority rule in 1994.
U.S. Treasury Secretary Scott Bessent then opted to skip this week’s G-20 meeting and Secretary of State Marco Rubio did the same at last week’s foreign ministers’ meeting in Johannesburg. South Africa currently holds the rotating presidency of the G-20, and the U.S. will assume the post in 2026.
The forum’s primary role is to keep the lines of communication open between the world’s major economies during difficult times, but its ability to do so is questionable when the source of the instability is internal.
“We see fragmentation of trade, we see fragmentation of the economy and that just increases the level of uncertainty,” Kganyago said in a previous Bloomberg interview.
Closer to home, Kganyago said South Africa’s proposed two-percentage-point increase in value-added tax rates — which last week saw the country’s budget postponed until March 12 after a political backlash — would also pose a potential price shock.
But what that means for monetary policy will depend on its impact on inflation expectations and whether there is a ripple effect on prices. “Monetary policy responds to those second-round impacts, not shocks,” he said in a previous interview. The SARB’s next meeting ends on March 20.
Source: Bloomberg
