“Adaptability is critical. In the current economic environment, it’s not enough for companies to endure pressure; they need to adjust their strategies, supply chains, and pricing models to survive – and thrive.”
This was one of the key insights of the latest Sanlam Trump and Tariffs podcast, which explored the implications of shifting US trade policy.
Sanlam Investments’ chief economist, Arthur Kamp, and equities portfolio manager Roy Mutooni unpacked how US tariff changes, particularly under President Donald Trump, are reshaping global markets, currencies, and investment strategy.
At the centre of current uncertainty is a landmark US court case scheduled for today (31 July). The US Court of Appeals for the Federal Circuit will hear arguments on the legality of enacted under the International Emergency Economic Powers Act (IEEPA). These tariffs, which imposed duties of up to 25% on a wide range of imports, were struck down by a lower court in May but remained in place pending appeal.
Read: Tariffs survive challenge as Federal Circuit pauses lower court’s decision
The case could significantly alter the scope of presidential power over trade policy. Kamp said the main concern is that the outcome could lead to “an even higher effective US tariff rate than we have at the moment”. He noted that although investors may hope for a roll-back, “this is still a shock to the system… you’d expect higher inflation, lower growth in the US”.
Market response to tariff uncertainty
Mutooni said the initial imposition of tariffs was a shock to growth, but markets struggled to price in the long-term impact. “If the manufacturing companies… ‘eat’ the tariffs as Trump calls it, there’s an impact on margins. If the tariff is passed on to the consumer, then there’s an impact on demand,” he said.
Initially, markets responded by de-rating equities – pricing in weaker future earnings – but later appeared to reverse course as expectations settled around a best-case scenario. Mutooni warned this may be overly optimistic: “The assumption is that all of these will be rolled back… which I think is a little bit presumptuous.”
A shift towards fragmentation
Kamp noted that the global economy is moving away from the integrated, high-growth, low-inflation era of the past few decades.
“We’re seeing a rise in protectionism,” he said, citing increasing trade barriers, sanctions, and financial restrictions. “The world is moving towards a more geo-economically fragmented state.”
This shift could have serious implications for capital flows and investor strategy. Kamp suggested that equity investors may need to shift their focus from macro-economic cycles to thematic, stock-specific fundamentals.
Strategic equity investing
Mutooni said equity investors must consider how companies are adapting to the structural changes in global trade. The US – long considered the “consumer of last resort” – is now putting up tolls – in the form of tariffs – to access its market.
“The EM [emerging markets] produced commodities [and] exported them to China and the Asian countries. And those Asian countries exported them to the US, which is the consumer,” he said. “Now that chain has been broken.”
Investors need to examine how companies are responding. “Are they finding new markets? Are they going to break themselves up? Are they actually going to invest in the US?”
Mutooni said stock picking in this environment depends on understanding “where is your market evolving to, where are your suppliers evolving to, and where are your competitors turning?”
What it means for South African investors
Zooming in on the domestic equity market, Mutooni said South African investors must differentiate between companies based on their exposure to global trade. Some food producers, for example, may be forced to find new export markets if US access becomes constrained.
Other sectors, such as telecommunications, are likely to be unaffected. “The telcos… have all of their capex [capital expenditure] either domestically or within the African environment,” Mutooni said. “Those are immune to what happens to tariffs directly, because their demand is domestic, the capex is domestic.”
He advised local investors to watch for second-order effects, including companies that supply exporters or are exposed indirectly through their client base.
“It’s a lot more nuanced,” he said. “There’s a lot more around finding the self-help stories and also the portals that could emerge from this whole new tariff world where there’s less demand, higher inflation and increased competition for an increasingly smaller buyer.”
