Rewriting South Africa’s script in a walled-off world

The global economy, once guided by open trade’s clear rules, now faces rising protectionism, dividing players and a shifting stage. A fractured world order looms, where South Africa — a fragile contender — must navigate trade tensions and local pitfalls to secure its footing. With the GNU wavering, can the country stay on script?

The postwar dream of unfettered markets, stitched together by institutions such as the IMF and the World Trade Organisation, is unravelling. The US, once the chief architect of global trade, is building walls, layering tariffs to cradle its industries. Protectionism taps a deep well of public frustration over job losses from globalisation’s tide, though whether it’s a passing wave or a deeper current remains unclear. The fallout is spreading, nonetheless. China has countered with its own levies, the EU is drafting retaliatory duties and Canada is hunkering down.

The global economy is reshaping into self-reliant rival blocs, disrupting the free flow of goods and capital. Nations’ self-reliant tilt risks destabilising markets, nudging the world off its open-trade axis.

This new order breeds risks. Growth, already wobbly, faces difficulties as import costs climb, squeezing demand and lifting inflation expectations. Supply chains, already strained, risk further disruption as tariffs fracture global trade.

Central banks face a dilemma. The US Federal Reserve, wary of stagflation’s echo, may hold interest rates firm, risking a deeper slowdown. Globally, peers mirror this restraint, pausing rate cuts to curb inflation — though easing could follow if recession threatens. Markets, jittery from trade uncertainty, are bracing for continued volatility, with investors shielding portfolios against a bumpy ride.

The dollar and US treasuries, typically crisis anchors, defied norms amid the tariff chaos — the dollar slid, yields soared — as recession fears and tariff-driven inflation eroded confidence in US assets, with speculation pointing to foreign bond dumps as nations such as China sold US treasuries to counter trade pressures and rebalance reserves. Still, no currency is threatening the dollar’s dominance. The euro, weighed down by the EU’s fractured politics, uneven growth and competing fiscal priorities, lacks cohesion to rival a global anchor. China’s tightly controlled yuan struggles for trust beyond Asia as capital controls limit its appeal, and the Swiss franc, a safe haven, is constrained by Switzerland’s small economy, undermining its scalability for global trade.

Amid the tariff-driven uncertainty, central banks are stockpiling gold, signalling unease over dollar reliance. Gold, illiquid for trade, hedges against protectionism’s financial disruptions, potentially weakening the greenback through diversified reserves.

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