Tariff tangles: A global lens on protectionism’s return

The global trading system, once heralded as the engine of growth and efficiency, is straining under the weight of resurgent protectionism. Tariffs are back in fashion, reshaping trade flows, investment strategies and political rhetoric alike.  

The numbers tell the story. The World Trade Organisation’s (WTO) April 2025 Global Trade Outlook and Statistics report warned that global trade volumes would shrink by 0.2% this year, citing “a surge in tariffs and trade policy”.

The risks are worse still: the WTO says reciprocal tariffs could shave a further 0.6 percentage points off merchandise trade growth.

The International Monetary Fund paints a similarly fragile picture.  In January, it forecast global GDP growth of 3.3% for 2025, cut to 2.8% in April, before nudging up to 3% by July – an uneasy dance of downgrades and modest recoveries that reflects both the scale of the tariff shock and the uncertainty it brings.

The economic consequences of this policy drift are complex. Tariffs can raise revenues and shield favoured sectors, but they also increase costs, distort investment and spark retaliation – for example US’s running battles with China, Canada and the European Union, to mention a few. 

This trade policy shift introduces an extra layer of uncertainty, resulting in countries and businesses scrambling to rejig supply chains and diversify export markets.

For investors, earnings forecasts blur and currency moves grow harder to call. From Washington to Beijing, barriers are rising and for economies such as South Africa, Switzerland, and the United Kingdom, each deeply integrated into global markets, the implications are profound.

While tariffs are rarely the sole determinant of economic performance, they interact with other headwinds such as Brexit’s legacy in the UK, deflation in Switzerland and fiscal pressures in South Africa to compound uncertainty.

We asked three Investec experts to provide a window into how tariffs are reshaping these geographies, their industries and their long-term strategies.

UK: A balancing act between protectionism and partnership

The UK finds itself navigating a precarious path. Reciprocal tariffs imposed by the US, currently 10%, may be manageable compared with the 25% levies slapped on other trading partners, but nonetheless complicate the UK’s economic outlook.

The car industry illustrates the fine margins at play. The US remains the single largest export market for British cars, and Washington’s general 25% tariff could have been devastating. But a compromise was reached: the first 100,000 vehicles exported annually will face only a 10% tariff, roughly matching 2024 volumes.

Steel and aluminium, however, remain saddled with a 25% duty, testing competitiveness in a globally glutted market. “While the UK has avoided a recent doubling in tariffs on steel and aluminium exports to 50%, the applicable 25% tariff is nonetheless an elevated rate, although such exports of these metals to the US are typically relatively modest,” says Shaw.

For investors, tariffs add another layer of complexity to an economy still digesting Brexit and battling sticky inflation. Yet, as Shaw notes, markets have often shrugged off trade tensions.

“At the onset of President Donald Trump’s tariff increases, investors’ concerns were global and reflected in a sell-off in stock markets worldwide.” But the prevalence of the so-called Taco trade – Trump Always Chickens Out – has seen stock markets reach record highs.

Still, the longer-term concern is strategic. The UK is leaning harder on new partners, striking a trade deal with India in May and is seeking to expand relationships across Asia-Pacific.  But the benefits of such pacts are slow to materialise. “Trade deals are long, complex processes. While they should ultimately result in increased exports and therefore higher growth, they are far from an instant fix,” cautions Shaw.

For the UK, caught between American tariffs, European rivalry and the uncertain fruits of new trade talks, the challenge could be balancing pragmatism with principle.

Switzerland: Gold, watches and the politics of precision

Switzerland’s reputation as a safe-haven economy has done little to shield it from Washington’s tariff barrage. Its CHF48.5 billion trade surplus with the US in 2024, means the country was always a tempting target.

A sweeping 39% tariff across nearly all product groups was announced, tempered only by exemptions for gold and pharmaceuticals. The carve-outs mean the effective rate is closer to 12%, but that remains punishingly high for a small, export-oriented economy.

The franc’s appreciation, up nearly 10% against the dollar, has compounded the pain as investors seek a safe haven amid trade shocks. For exporters, that appreciation further erodes competitiveness. “This is yet another shock to the Swiss economy,” Peers explains. “Export-heavy companies will see downward pressure on revenue and profits; domestic-only firms may be relatively unaffected. High-rated Swiss corporates could see spreads widen if revenue risks increase.”

Faced with such pressures, Swiss firms are already looking to diversify. Supply chains are being re-routed towards the EU, still Switzerland’s biggest partner, as well as Asia, the Middle East and Latin America. Pricing models, too, are under review, “Swiss companies could have a pricing strategy in order to absorb part of the tariff cost or raise US prices,” says Peers.

Markets remain hopeful that Washington will walk back some of its tariff measures, “but if maintained, the deflationary shock will be very big and could have a significant impact on Swiss GDP,” says Peers.

South Africa: Waiting for the dust to settle

South Africa’s trade profile makes it both vulnerable to tariffs and curiously resilient. Mining, the country’s largest export sector, has been spared for now, with many minerals exempt from Washington’s new levies which buys time.

Agriculture and manufacturing, however, face sharper headwinds. For farmers exporting citrus, wine and nuts to the US, and manufacturers competing in already crowded global markets, higher tariffs will be harder to absorb.

“A number of minerals are exempt from the new US tariffs, for now at least,” notes Chris Holdsworth, Chief Investment Strategist at Investec Wealth & Investment International.

The balance of relationships matters. South Africa is tightly linked to the EU, China, the US and its African neighbours. Tariffs have begun to shuffle these dynamics, though the picture remains fluid.

“It’s probably too early to tell,” Holdsworth cautions. “There is a non-negligible chance that exports that would have gone to the US go elsewhere, lowering goods price inflation across the globe, and increasing competition for manufacturers. Some countries may respond by imposing tariffs to protect their own domestic manufacturers.  I think we’ll have a better feel in a few months.”

For investors, however, tariffs are not the dominant concern. According to Chris, “the bigger concern weighing on the bond market is the fiscal trajectory. In the equity market, the worry is the trajectory for Chinese growth and the possibility that the South African Reserve Bank keeps real rates in restrictive territory for the foreseeable future.”

What does that mean for tariffs on South Africa? Pretoria has already begun to react, loosening some competition restrictions to help exporters and considering new tariffs on steel.

Holdsworth believes that such moves mark the start of a broader rethink: “I don’t think it’s possible at this point to look at long-term opportunities aside from noting that renewed focus on industrial policy will probably provide some benefit to exporters.”

“There is still a huge amount of uncertainty, and it may be difficult to play the theme through listed shares even if it is successful. We need a bit more time to try gauge where the dust will settle (assuming it does).”

Interestingly, markets remain calm in the face of uncertainty. “Volatility is strangely low despite the uncertain economic backdrop,” Holdsworth observes. “It seems the market has adopted a sanguine approach, assuming that either the tariffs will be reversed or that they will not be that impactful. Investors are seeing the cup as half full at this point.”

Yet he adds a warning that tariffs are likely to help address the US fiscal position, adding that they are “likely here to stay in some shape or form”.

For South Africa, then, the immediate effect is muted. But the longer tariffs persist, the more they could distort trade patterns, undercut agriculture and manufacturing, and complicate an already fragile fiscal and growth story.

The bigger picture: A protectionist drift

Across South Africa, Switzerland and the UK, the story is less about immediate collapse than about cumulative frictions. Tariffs, layered atop other macroeconomic pressures, reshape investment priorities, trading patterns and industrial strategies.

Protectionism’s revival is already encouraging realignments from the UK’s pivot to India, to Swiss exporters diversifying into Asia, to South Africa’s industrial tweaks. Yet the broader concern is philosophical: that the world is drifting away from decades of liberalisation toward a more fragmented, less efficient system.

As Shaw puts it from London, “It is disappointing to see the current direction of travel moving away from free trade and towards greater protectionism.” For smaller, open economies, the stakes could not be higher.