Brent crude oil price plummeted below $64 (R1 250) a barrel on Tuesday, marking their lowest point since April 2021, spurred by escalating tensions between the United States and China, raising concerns about future demand for oil as China is one of the world's largest oil consumers.
The larger OPEC+ output hike planned for May and Saudi Arabia’s plans to cut official selling prices for next month also added to the Brent crude oil price pressure, it trading at its lowest level in nearly four years and shaving 4.5% off Sasol's share price just on Tuesday.
US President Donald Trump has heightened the stakes in the ongoing trade dispute between the two economic giants, threatening an additional 50% tariff on a range of Chinese imports.
This potential move is set against a backdrop of existing tariffs, further straining trade relations.
In response, Chinese officials have vowed to "fight to the end" and unveiled a series of swift and intensive measures aimed at stabilizing the capital markets and restoring investor confidence, signalling an unwillingness to back down in the face of US pressure.
Nigel Green, CEO and founder of global financial advisory giant deVere Group, said China was sending an unmistakable message to Washington that it was fully prepared for a deepening trade war, and it was not backing down.
Green said the clearest signal came through the yuan, which was quietly sliding lower — a strategic warning shot that said if provoked, China can and will use currency devaluation as a potent countermeasure.
“The weakening yuan is not simply market mechanics at work; it is Beijing putting Washington on notice that far more forceful actions are in reserve if escalation continues. This is now a battle of endurance. Trump is ratcheting up the pressure, believing he can force concessions through intimidation,” Green said.
“The timing and nature of the yuan’s movement underscore the seriousness of Beijing’s position. It’s not a reckless devaluation aimed at short-term advantage. It is a carefully calibrated message to the White House: escalation will not come without consequences.”
This comes as the JSE and the rand continued struggling to find traction on Tuesday, with the domestic currency trading at a weak R19.61 to the US dollar by 6pm.
Trump on Monday threatened to impose an additional 50% tariff on China starting Wednesday unless Beijing retracts its retaliatory measures. The recent downtrend in the financial markets has driven fears that Trump's trade war would cause a global recession and reduce energy demand.
Hassan Fawaz, chairman and founder of UAE-based GivTrade, said the expectations of an increase in US crude inventories could limit the potential for a recovery in the near term.
Fawaz said that on the other hand, producers may reduce drilling activity in response to prolonged price weakness, providing some support.
“The oil market outlook remains uncertain, with US President Trump’s tariffs serving as a significant source of volatility. These tariffs have raised concerns about escalating trade tensions, particularly with China,” Fawaz said.
“Should tariffs increase further, the risk sentiment could sour, exacerbating fears of a global recession.”
The fallout of US tariffs across global markets has resulted in fears of a global recession being factored in global growth scenarios.
According to Old Mutual Group chief economist Johann Els, a US recession is now his base case.
Els has revised his US economic growth forecast down from 2.2% in January to 1.5% in March, and now to just 0.9% for the full year. He said that although the tariffs may cause a short-term spike in inflation, the broader disinflationary effects of weaker demand were likely to dominate.
Els said the US Federal Reserve was expected to respond by holding rates steady at the May meeting but thereafter initiate a rate-cutting cycle from June onward, potentially delivering up to 125 basis points in cuts over the remainder of 2025.
From the South African perspective, he said the direct trade exposure to the US was relatively limited. While US data indicates a $9 billion trade deficit (equivalent to 2% of South Africa’s GDP) local figures suggest a more modest $2bn gap.
“Precious metals, base metals, and vehicles comprise the bulk of South African exports to the US, with precious and some base metals notably exempt from the new 31% tariff rate. Imports from the US are concentrated in machinery, electrical goods, and chemicals,” Els said.
“As a result, the macroeconomic impact on South Africa will likely be felt more acutely in specific industries such as agriculture and vehicle manufacturing, rather than across the broader economy.”
Els said supportive monetary policy stances from China and the Euro Area could mitigate some of the economic downturn effects, while stabilising oil prices and a potentially firmer rand signalled a period of cautious optimism.
BUSINESS REPORT