Monthly Market | May 2025
- albe9408
- Jun 11
- 9 min read
May 2025
The global trade landscape saw significant shifts as the US and China agreed to a 90-day pause on tariffs, dramatically reducing levies. This temporary truce has prompted other countries to reconsider their negotiation tactics with the Trump administration. Markets rallied as investors cheered a tariff truce between the United States and China that greatly reduces the risk of a global recession. The US will reduce its 145% tariffs on most Chinese imports to 30% by 14 May, while China will cut its 125% on US exports to 10%. The US & China had their first call since the Geneva meeting, signalling progress in trade talks.
However, Moody’s downgrade of the United States’ sovereign credit rating down one notch to Aa1 from Aaa poses a new challenge. Investors remain unfazed by Moody’s downgrade of US credit, viewing it as a temporary shock amid ongoing concerns over the nation’s $36 trillion (R650 trillion) debt.
US producer prices fell unexpectedly in April as margins shrank with 0.5%, suggesting that companies are absorbing some of the hit from higher tariffs. Investors are concerned about Trump’s “big, beautiful bill” which members of the House of Representatives have passed. The bill will add nearly $4 trillion to the already massive fiscal deficit over the next decade.
The US consumer sentiment index slumps to its second lowest level ever, with consumer one-year inflation expectations surging to 7.3% from 6.5% last month, as households brace for an inflation surge.
US Treasuries owned by foreigners rose nearly 12%, to $9,05 trillion in April, an all-time peak, rising for a third straight month. UK investors have now overtaken China as the second largest non-US holder of Treasuries.
The German GDP rose 0.4% in the three months to March which is the strongest quarterly economic growth in Germany since 2022 due to stronger-than-expected growth in manufacturing output and exports.
Japan’s core inflation climbs to 3.5% in April, the highest in more than 2 years. However, its economy contracted by 0.7% in the first quarter, driven by weaker trade figures and stalling consumer spending.
Hong Kong's economy expanded by 3.1% in the first quarter from a year earlier, supported by an increase in exports of goods and services, and a resumption of growth in overall investment expenditure.
UK CPI (3.5%) hit its highest in three years due to UK consumer inflation picking up faster than expected in April. The European Central Bank may need to cut rates below 2% as markets now see a roughly 90% chance of an ECB rate cut on June 5. Monthly real GDP in the UK is estimated to have grown by 0.2% in March 2025.
EM equity funds have attracted $10.6 billion in inflows in the first five months of the year with a 43% increase over the same period last year. Emerging market equity funds are leading global performance this year, bolstered by attractive valuations and years of under-positioning by investors. This includes South Africa.
China’s loan prime rate had been lowered by 10 basis points to 3.0%, while the five-year LPR (which influences the prices of mortgages) was reduced by the same margin to 3.5%.
Gold fell as investors booked profits after tensions eased between the US and China, cutting demand for haven assets. Oil prices experienced volatility due to geopolitical tensions and fluctuating supply and demand dynamics. However, not all OPEC countries are prepared to lower production and Iran is currently pumping large amounts. For now, it is good news for South Africa.
Brent Crude Oil
South Africa
The Monetary Policy Committee of the South African Reserve Bank cut its key repo rate by 25 basis points on Thursday, citing an improving inflation outlook while pointedly noting that the spectre of uncertainty still haunts the global economic landscape. With the aim of the SARB to try and keep inflation at the lower end of the spectrum, another rate cut is expected for this year and maybe two more to follow in 2026.
South Africa Interest Rate
A delegation led by President Ramaphosa, which included people like Johan Rupert, Ernie Els and the leader of the opposition and Agriculture Minister, John Steenhuisen, visited the Whitehouse.
President Cyril Ramaphosa reacted positively to his three-hour meeting with US President Donald Trump, saying it went very well. Many observers viewed Trump’s assertion that there is a “genocide of white farmers” occurring in South Africa as an ambush. The tense Oval Office meeting was live streamed globally to millions, with Trump displaying videos showing Julius Malema singing “Kill the Boer,” and a memorial to slain white farmers. Sources said during the bilateral working lunch that followed, both delegations had the opportunity to shift focus and explore areas of alignment. SA’s proposal for a trade deal and the G20 were the key topics of conversation, and Ramaphosa said afterwards that there would continue to be engagement between US and SA officials, particularly at a trade and industry level.
President Cyril Ramaphosa described his bilateral meeting with US President Donald Trump in Washington as “robust and fruitful”. Behind the scenes, the South African government feels it made progress in resetting its relationship with the US and advancing trade discussions.
Investor demand at South Africa’s weekly government bond sale more than doubled as risk appetite improved globally after US and China reached a deal to temporarily lower tariffs.
The rand firmed to its strongest level in nearly two months, thanks to a weaker greenback and the approved budget. It declined consistently and tester R17.80 to the dollar.
South African Rand
Deputy Finance Minister David Masondo also stated that the Treasury and the SARB are working on an appropriate inflation framework for South Africa, with an announcement to be made soon. It is expected that the new inflation target might be a fixed point within the current ranged target.
Illicit trade is costing South Africa R30 billion a year. TRACIT (Transnational Alliance to combat illicit trade) ranked South Africa 60th in the world for its efforts to clampdown on illicit trade. Alongside China and Brazil, South Africa has become notorious for harbouring some of the world’s largest markets for illicit product.
Finance Minister Enoch Godongwana delivered what’s being referred to as Budget 3.0, which included some spending cuts alongside lower revenue forecasts due to revised-down GDP growth. VAT will remain at 15%. The Treasury raised levies on petrol by 16 cents per litre and on diesel by 15 cents per litre to help offset lost revenue from the withdrawal of the VAT rate increase. Godongwana kept the personal income tax brackets unadjusted to account for inflation to help compensate for the loss of VAT revenue. He also said that the R1.6 billion increase in social grants for 2025/26 in the previous budget will remain unchanged, except for welfare grants. Above inflation increase on sin taxes was announced, while the sugar tax will remain unchanged.
Nissan is considering closing its SA assembly plant in Rosslyn, a move that would mark a major pullback from a market it has served for more than half a century and send ripples through the country’s manufacturing sector.
Government-owned poultry producer, Daybreak Foods, which employs thousands of workers and delivers around 7% of the country’s poultry supply, faces liquidation due to an unsuccessful bid to raise cash to stave off creditors. Another failed SOE.
The impact of Tariffs and the possible loss of AGOA is illustrated in the graphs below (Daily Maverick).
SA's major exports destinations
Comparing total goods trade (exports + imports) with US versus with China
Agoa exports to the US - US$ billion and % SA GDP
However, it may be to the US’s geopolitical advantage to retain a relationship with South Africa, which remains a gateway economy to the rest of Africa.
Snippets from the market.
Trump threatens 25% tariff on Apple, and other tech giants if they don't start making devices in the US.
Bitcoin hits new record high near $112,000 as rally marches on.
Transnet obtained a further R51bn in government guarantees - which the state-owned rail and port operator says will enable it to refinance maturing debt as well as improve and reform its operations.
The department of public works & infrastructure has begun a process of verifying its workforce aimed at rooting out “ghost employees” from its payroll.
A 108-page draft Mineral & Petroleum Resources Development Bill was gazetted, proposing to fundamentally overhaul the regulation of the industry. The much-anticipated draft bill was approved by the cabinet together with the critical minerals and metals strategy which Mantashe says deals with issues raised over several years.
The National Assembly has approved doubling the annual limit for private political funding (R30m), and the threshold for declaring these donations (R200 000).
SA Unemployment increased by one percentage point to 32.9% with close to 300 000 fewer people employed between January and March.
The first group of 49 Afrikaner South Africans granted refugee status under a programme initiated by US President Donald Trump arrived at Dulles Airport, outside Washington, DC, and then on to Texas.
The department of trade, industry & competition and the broad-based BEE Commission are planning amendments to legislation to give the commission greater enforcement powers because of poor compliance.
Home Affairs Minister Leon Schreiber announced that, following months of information technology reforms at the department, about 1.4 m naturalised South African citizens and permanent residents will be able to obtain smart identity documents.
The Constitutional Court has strengthened access by disabled people to copyright-protected works.
Infrastructure SA, a government initiative established as a single point of entry for infrastructure planning, management, and delivery, has launched a 24-month programme with three distressed municipalities aimed at improving the implementation and delivery of infrastructure projects.
The move to relax Broad-Based Black Economic Empowerment laws to enable Starlink to have a shot at setting up shop in South Africa has not only raised eyebrows but attracted the interest of Parliament. Communications Minister Solly Malatsi has been called to appear before Parliament on Tuesday, 27 May, to explain this proposed policy direction.
SA’s only driver’s licence machine is now back in operation after a three-month breakdown.
A proposed R15bn gas-to-power plant in the financially strained Matlosana (Klerksdorp) municipality is under intense scrutiny, with energy analysts and local councillors raising concerns about the project’s feasibility and regulatory compliance, as well as the credibility of its developer, Urban Blue International.
The African National Congress wants Parliament to investigate a fact-finding-mission by at least 10 MPs comprising various political parties on the invitation of the South African Friends of Israel. The ANC has denounced the trip, saying it was not sanctioned by the Department of International Relations or Parliament.
S&P Global Ratings has forecast SA’s real GDP will grow between 1.3% and 1.6% over 2025 to 2027 — more than double its estimated 0.58% growth for 2024 — suggesting the country’s medium-term economic prospects have improved. The reduction of loadshedding has helped.
Members of the United National Transport Union have overwhelmingly voted in favour of a strike at struggling Transnet following a wage dispute.
Trade, industry & competition minister Parks Tau has relaxed competition rules for SA’s port and rail network sector as part of government-wide efforts to rejuvenate the country’s underfunded and underperforming logistics.
SA’s agricultural machinery market ended nearly two years of monthly declines. Improved weather and easing interest rates have lifted sales of tractors and combine harvesters, by 5.4% year on year to 527 units.
Nearly half of interprovincial moves occur between Gauteng and the Western Cape. Most movers choose homes similar in size, though upsizing is on the rise. Crucially, work – not crime – is the main reason behind 22.9% of relocations.
Eskom said that load shedding was due to delays in returning several units from planned maintenance and unplanned breakdowns. Eskom said it is currently emerging from an intensive maintenance cycle, which is essential for long-term reliability. The utility added that the system was in a significantly stronger position than in past winters.
Namibia expects French oil major TotalEnergies to take a final investment decision on its Venus discovery in the country in the fourth quarter of 2026.
Three of Botswana’s commercial banks unilaterally raised their prime lending rates, marking the first time banks have uncoupled from the Bank of Botswana interest rate benchmark since the freedom to do so was introduced two years ago.
Another mass poisoning of vultures occurred in Mpumalanga when more than 100 critically endangered raptors have been found dead around a poisoned warthog. The attacks are believed to be part of a coordinated effort by criminal poaching syndicates to wipe out vultures before launching a wave of poaching activity.
President Trump extended the deadline for implementing 50% tariffs on the European Union to July 9th following a “good” call with European Commission President Ursula von der Leyen, during which both leaders agreed to fast-track trade negotiations.
President Trump’s self-proclaimed “first buddy”, tech billionaire and Tesla CEO, Elon Musk, stepped down from his role as a special government employee after leading an effort to slash spending and shutter federal agencies.
Google launched the new Gemini 2.5 Pro AI model, the company’s “most intelligent AI model” with advanced coding, enhanced reasoning and scarily impressive video generation.
Both the Bank of Korea as well as the Reserve Bank of New Zealand cut interest rates 25bps in, line with market expectations.
The SARB is considering setting a specific target of 3% for headline consumer price inflation rather than the current 3-6% range. This shift is being evaluated to potentially better align with global economic trends and reduce the risk of inflation falling outside the current target range.
Discovery Green and petrochemicals giant Sasol launched a new company on, 15 May 2025, Ampli Energy, which aims to make renewable energy more accessible and less costly for small, medium and micro enterprises.
Despite rising multipolar rhetoric, the US dollar remains the unrivalled anchor of the global financial system, far outpacing challengers like the euro, yen, and renminbi. It accounts for nearly 60% of global central bank holdings.
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