This is going to be a wild year. This is a statement you can make with confidence in any year where Donald Trump will be president. If 2024 was the Year of the Election, with four billion eligible voters going to the polls in 70 countries, then 2025 will be the Year of Industrial Policy. Governments will be all over the markets like this is suddenly a good idea. These are the issues I am watching closely.

Donald Trump

Say no more. Donald Trump will set the tone for trade policy globally. This is a man with an incredibly tenuous grip on how global trade works, yet he will attempt to wield tariff policy like a weapon to intimidate other countries into doing what he wants them to do. How he treats his allies is particularly important to watch. If he comes out of the gate swinging at Canada and Mexico, as he has threatened, the message will be clear to all. But this is not his first term and although the US is the world’s largest economy it is incredibly dependent on these two trading partners: Canada for oil and Mexico to for manufacturing capacity. You can’t further cut trade with China without replacing it and Mexico is that replacement.

I think Trump grossly misunderstands China’s dependency on exports to the US and because of this, overestimates the leverage he has over China. In 2018, 19% of China’s exports of goods went to the US and in 2024, only 11% went to America. The US will squeeze, but China is expecting that and they are no fools. China has been working hard on building relations around the world, whereas Trump has done little but wreck them.

Ironically, Trump might actually bring hostilities to an end in both the middle east and Ukraine. If he does, he deserves two Nobel Peace Prizes. The Abraham Accords were negotiated under Trump and whilst these might have been one of the reasons Hamas attacked Israel, that is hardly the fault of the accords. Israel has destroyed Hamas and Hezbollah and largely neutered Iran. Trump has a good relationship with the Saudis, still the most important country in the Arab world. This is something to work with.

Ukraine, the other horror show in the media, could also be brought to an end, but how that happens, is important. Trump could cut off all support for Ukraine and that would be that. Russia would have its colony, and the war stops (and the insurgency starts). He has said that both Putin and Zelensky need to come to the negotiating table and Zelensky immediately said he is ready. Cleverly played. It will be hard for Trump to remove support to the only party saying they are ready to negotiate. Ukraine will have to give up Crimea and the Donbas, but the killing with stop. The only way this holds is if Ukraine is given membership of Nato, so that is something to watch closely. Nato has its problems, but it has worked.

Threats to AGOA will happen. This is obviously not good, but the cash benefit of AGOA is only around R2 billion per year and mainly impacts six companies. It won’t be good to lose it, but it won’t be catastrophic either.

Our dusted off and re-polished ambassador to the USA, Ebrahim Rasool, will have his work cut out for him, but I think he is a good choice for that important role.

The WTO is at even greater risk. I hope Trump doesn’t do more damage but the risk is there. Without a rules-based order we revert to a the law of the jungle and in that world the strong eat the rest of us.

The Sahel and Mozambique

It is hard to exaggerate the horrors unfolding in Sudan and the Sahel and in typical fashion, African leaders are silent, evidence that to African leaders, African lives have no value.  The carnage, I sadly suspect, will continue.

Mozambique’s stolen election is another example of African leaders smiling while their cronies steal elections. It is not suprising that Emerson Mnangagwa, SADC Chair and a man not unfamiliar with a bit of vote rigging, has endorsed the Mozambican results. This will see our immigration crisis intensify. It is worth watching Minister Schreiber closely to see how he handles this. I think the political implications are significant.

The G20 and Brics+

The G20 matters, but only in rather vague ways, like brushing your teeth is good for you, but no single dental grooming actually makes a difference. McKinsey have done well to ingratiate themselves with SA business by agreeing to project manage everything for business for the G20 project at no cost. The President is not happy about this, but then he is hardly in a position to point fingers given the state of probity in his own party.

If G20 is like brushing your teeth, then Brics+ is taking a large handful of vitamins each morning, washing them through your kidneys to make expensive urine and little else. Take too many though and your liver might fail. This is Brics. Very little upside and quite a high cost, especially with the more disreputable new members like Iran. Brics is simply an extension of China’s foreign policy. No there won’t be a Brics currency and no Trump won’t do anything other than complain about the idea of a Brics currency. Having said that, we have a long list of (mostly) dodgy states wanting to join Brics:

*Yes, Syria applied to join in October 2024! Of course they did.

The more countries join, the less will get done. Because Brics is not underpinned by any agreement or constitution, it tends to be whatever China wants it to be. Sometimes India, as the second largest member, gets to speak up, but mostly, Brics is a place where mates meet to complain about the West. I don’t see this changing.

The GNU will be tested

The honeymoon period for the GNU is over. It will be severely tested this year and although I hope it holds, there is a non-trivial chance that it doesn’t. Very bad things will happen if it gives, so I am watching this very closely. There is a significant grouping in the ANC, clustered around Paul Mashatile and Panyaza Lesufi, who want to see it fail. They might have their wish granted. The SACP certainly want to see it fail but no one pays any attention to them anymore. Cosatu is a different matter, but for now, they appear to be pragmatic more than ideological.

Industrial policy

Despite its many failures and few successes, industrial policy is being pursued everywhere as a panacea for all social ills. It has become whatever you want it to be. Can it work? Will it work? Mostly it will fail terribly but when it fails, we will be told either that it does work, it was just that specific implementation that failed, or that the thing called industrial policy is really something else. South Africa is going after this like a thirsty man after a mirage. Localisation is our preferred weapon of choice, particularly government procurement and tariffs, with a smattering of subsidies thrown in. The automotive industry will receive billions again to make cars here and now with the new tax incentive for making electric cars locally, the dream is that companies will make electric vehicles (EV’s) here at scale. I hope they do, but I’m not optimistic. The 25% import duties on EVs remain, making electric cars too expensive for most people and the local producers, despite not making a single EV locally, want that duty to remain to keep the competition out. This is the strongest, best funded lobby in the country, so they will keep fighting for that free money.

Speaking of free money, by the end of February 2025 we will know if export duties on scrap metal remain. Between the forced local discounts and export duties, around R8.5 billion per annum is transferred to the small number of companies melting down scrap. This is an industry unable to survive without support and there is a death match at the moment between the companies who want the free money and the people who are losing their shirts because their competitors have the free money and they don’t. Spare a thought for the 300 000 waste pickers who are part of the funding to those beneficiary companies.

We are seeing positive developments in how long it takes for tariff decisions to be taken and implemented. It should be six months, but it was edging towards six years. The new minister is taking out that new broom to sweep clean. Let’s hope this continues.

Argentina and Milei

President Javier Milei is running the world’s largest experiment in anarcho-capitalism. He is cutting red tape, shrinking government and (for now) appears to be reducing inflation to manageable levels. If he turns Argentina around, it will ripple across the world. It’s seldom that economists get to run countries, but here we have one and he is not holding back. I don’t know what will happen to Argentina, but the era of heavy-handed government interventions will be start rolling back if Milei succeeds. I wish the people of Argentina well. He is a wild man.

Send this email to your mates and tell them to subscribe!