Jaco-Chris Koorts, Portfolio Manager at Glacier Invest
The US administration has declared sweeping import tariffs under the banner of “Liberation Day”, effective as follows:
- 10% baseline tariff on all imports to the US, effective 5 April 2025.
- 25% tariff on foreign-made vehicles.
- Case-by-case tariffs on specific countries perceived to have trade barriers with the US, effective 9 April 2025.
Of particular relevance to South Africa is a 30% tariff on exports to the US. However, critical commodities such as gold and platinum are exempt, which mitigates some of the immediate economic impact on our local industries, since more than half of all SA exports to the US are precious metals.
Market reaction
As we saw during President Trump’s first term, tariffs often trigger short-term market volatility, and we have already observed a “risk-off” shift among global investors, with markets reacting negatively to the announcement. The US dollar has also weakened sharply post the tariff announcements.
However, history reminds us that crises also create opportunities. This development may accelerate trade diversification between countries, potentially creating new trade opportunities or strengthening existing trade relations between countries outside of the US.
US Treasury Secretary Scott Bessent also described the announced tariffs as a ceiling, assuming no retaliation, suggesting room for negotiations. However, European Commission President Ursula von der Leyen has already said the European Union is prepared to respond with countermeasures if talks with Washington failed, thus indicating that we may be entering a period of “eye for an eye” tariff talks.
Market dynamics and portfolio resilience
While heightened volatility is expected in the near term, current conditions differ meaningfully from past crises. Unlike previous episodes where asset correlations spiked uniformly, recent capital flows reveal dispersion across regions. Year-to-date, investors have rotated out of US equities into markets such as Europe and China, creating selective opportunities for active managers. The strategies within our portfolios are designed to capitalise on this differentiation, leveraging tactical shifts in allocation to navigate market dynamics effectively.
Critically, the managers we employ in our solutions are seasoned in adapting to local and global sentiment shifts. Their focus on risk management, coupled with their ability to make the most of tactical opportunities, ensures that our portfolios remain positioned to weather short-term disruptions while capturing long-term value.
The importance of perspective
Market downturns test investor resolve, but they also underscore the importance of discipline. Emotional decisions – such as exiting equities during periods of stress – often crystallise losses and forfeit future recoveries. By contrast, staying invested allows portfolios to benefit from eventual rebounds, which have historically rewarded patience.
We remain steadfast in our conviction that the managers within our portfolios are well-equipped to navigate this environment. Their strategies prioritise flexibility, enabling them to rebalance exposures, increase defensive allocations, or identify undervalued opportunities as conditions evolve.
Conclusion
We encourage you to view this period through a long-term lens, trusting in the robustness of your portfolio’s construction and the expertise guiding it.
ENDS
