Trade war upends markets and the 2025 economic outlook

The ongoing trade tensions between the United States and various nations have continued to weigh heavily on global financial markets, leading to heightened volatility and uncertainty. Despite President Trump's announcement of a 90-day pause on additional country-specific tariffs for nations that have not retaliated, the economic impact remains a cause for concern. To shed light on the trade war, market dynamics, and the economic outlook, Isaah Mhlanga, Chief Economist & Head of Research at RMB, joined CNBC Africa for a discussion. Mhlanga expressed surprise at the broad-based levels of tariffs imposed by the US, highlighting the aggressive nature, particularly towards China. The lack of economic rationale behind these measures has led to uncertainty and challenges for businesses trying to navigate the ever-changing landscape. In the midst of this uncertainty, questions arise about the potential for fiscal policy to offset economic impacts and the path forward for central banks. However, the constrained fiscal space across many countries and the risks associated with inflationary pressures from tariffs pose significant challenges to policy responses. Scenario analysis suggests a downward revision in growth forecasts, with the global economic outlook and trade tensions playing a significant role in shaping future growth prospects. While the long-term reform agenda in South Africa remains intact and could support a positive credit rating outlook, the looming threat of a deeper global recession could impact economic growth projections. The interview also delved into the prospects for credit rating agency upgrades, with the potential for positive surprises if growth outperforms expectations. Despite the complexities and uncertainties surrounding the trade war and economic outlook, a cautiously optimistic view is maintained, acknowledging the challenges while emphasizing the importance of continued reforms and strategic planning for long-term growth.