Following the presidential inauguration of newly-elected Donald Trump in the United States yesterday, SARB Governor Lesetja Kganyago told media in Davos today that the measures that Trump plans to take could lead to the “fragmentation of the global economy”.
“[This] could spur other countries to think that they can justify taking protectionist measures and these measures are negative for global trade. Global trade is the lifeblood of the global economy,” Kganyago told Bloomberg.
Kganyago’s observations comes on the heels of a statement by Trump, before being sworn into office, that he would enact threatened tariffs of as much as 25% on Mexico and Canada by February.
Mexico and Canada are two of America’s top three trade partners, with the U.S. reportedly importing $475 billion worth of goods from Mexico and $418 billion from Canada in 2024.
According to Reuters, when asked by reporters at the White House whether he would impose a universal tariff on all imports into the U.S., Trump reportedly said: “We may. But we’re not ready for that yet.”
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The rand in South Africa gained early on Monday as markets awaited Trump’s inauguration and policy announcements ahead of a week packed with domestic data releases.
Kganyago said that if the measures taken are inflationary, it could slow down the disinflation process that the central banks had so steadfastly worked on since the great inflation of 2022.
“And the risk is then that the accommodation, or should I say, the reduction in the restrictiveness of monetary policy that we had seen over the past year, could then be brought to an abrupt halt,” he added.
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