The global trading system is undergoing its most significant realignment since the establishment of the World Trade Organisation. What began as a bilateral dispute between the United States and China has evolved into a broader restructuring of supply chains, trade agreements, and industrial policy frameworks that touches every major economy — and emerging markets like South Africa are squarely in the crosshairs.
In this piece, we explore the mechanisms through which trade tensions transmit to emerging market economies, assess the specific implications for South Africa, and outline the investment strategies that can help portfolios navigate this evolving landscape.
Watch: David Wilson, Chief Investment Officer at Harbour Wealth, discusses the trade outlook for emerging markets.
The new trade architecture
The post-2020 era has seen a fundamental shift in how policymakers think about trade. The concept of "efficiency at all costs" — which drove the globalisation of supply chains over the preceding three decades — has given way to a framework that prioritises resilience, strategic autonomy, and what policymakers euphemistically call "friend-shoring."
In practice, this means companies are diversifying their supply chains away from single-country dependencies, governments are offering substantial incentives for domestic manufacturing (the US Inflation Reduction Act and CHIPS Act being prominent examples), and trade agreements are increasingly shaped by geopolitical alignment rather than purely economic logic.
For emerging markets, this creates a dual reality. Countries that are well-positioned within the new geopolitical architecture — such as Mexico, Vietnam, and India — are seeing significant inflows of foreign direct investment as companies "near-shore" or "friend-shore" their operations. Those that fall outside the primary alignments face a more complex calculus.
Where does South Africa stand?
South Africa occupies an unusual position in this landscape. As a member of BRICS and a country with deep trade ties to China, it might be expected to face friction from the US-led bloc. Yet South Africa also benefits from longstanding trade relationships with Europe and the United States through AGOA (the African Growth and Opportunity Act) and various bilateral agreements.
The practical impact has been mixed. On the positive side, South Africa's mining sector has benefited from the global push for critical minerals. Platinum group metals (PGMs), manganese, and chrome are essential inputs for the energy transition — and Western nations are actively seeking to diversify their sources of these minerals away from Russia and China. South Africa, as one of the world's leading producers, is a natural beneficiary.
On the other hand, South Africa's automotive industry — the country's largest manufacturing exporter — faces meaningful headwinds. The sector is heavily integrated into global supply chains, and any increase in tariffs or non-tariff barriers could erode the competitiveness of SA-assembled vehicles in key export markets.
The countries that will thrive in the new trade environment are those that can position themselves as indispensable links in reorganised supply chains — not those that try to insulate themselves from change.
The investment implications
For South African investors, trade tensions create both direct and indirect effects on portfolios. The direct effects are relatively straightforward: companies with significant export exposure may see margin pressure if tariffs increase, while import-dependent businesses face higher input costs.
The indirect effects are more nuanced but potentially more significant. Trade tensions tend to strengthen the US dollar — which, all else being equal, weakens the rand and other emerging market currencies. A weaker rand boosts the rand-denominated returns of offshore investments but increases the cost of imported goods, contributing to inflation.
Diversification across geographies is the most effective response. Portfolios that are concentrated in SA-listed equities are exposed to the specific risks facing the South African economy. By allocating a meaningful portion of investable assets to global markets — including both developed and emerging markets — investors can reduce this concentration risk.
Sector selection matters. Within South Africa, companies that are positioned to benefit from the trade realignment — such as mining firms with critical mineral exposure, logistics companies facilitating new trade routes, and technology firms serving global clients — may outperform those in more exposed sectors.
Structured products can play a valuable role for investors seeking participation in global themes with defined risk parameters. Products linked to global equity indices or commodity baskets can provide exposure to the beneficiaries of trade restructuring while incorporating capital protection features.
Looking ahead
Trade tensions are unlikely to resolve quickly. The structural forces driving the current realignment — technological competition, energy security, demographic shifts — are multi-decade phenomena. Investors who recognise this and position accordingly will be better served than those who wait for a return to the pre-2020 status quo.
At Harbour Wealth, we are actively monitoring trade policy developments and their implications for portfolio construction. Our approach is to build resilient portfolios that can perform across a range of scenarios, rather than betting on a single outcome.
To discuss how your portfolio is positioned relative to these themes, contact your Harbour Wealth advisor.