He is back and South Africa’s economic welfare – like that of most other global economies – is not on his list of priorities. On Monday, 20 January, Donald Trump was inaugurated as the 47th president of the United States of America (USA) and wasted no time in making the same waves that were hallmarks of his first presidency.
He signed orders to remove the USA from the World Health Organization (WHO) and the Paris climate agreement. Trump has never shied away from his rhetoric of America first, second and third.
According to economist Prof Waldo Krugell from the North-West University (NWU), “bad outcomes” might be on the horizon for South Africa.
“There has been much speculation about what Donald Trump's second presidency of the USA will mean for South Africa and our economy. Most of the comments are about his trade policy and the possibility of tariffs on imports into the USA. This is especially about trade with China and Mexico. There is also talk of a general tariff for the products they import, but something like this should not have a major impact on South Africa's export competitiveness, because all countries are affected. The greater danger is that the Trump administration will pay little attention to the rules of the World Trade Organization. It will affect us if they simply decide to, for example, charge additional tariffs on steel, or cars, or citrus,” Krugell explains.
He adds that: “The much bigger impact will be how his policies affect economic growth, employment, government debt, inflation, and interest rates in the USA and how that will spill over into our own exchange rate and interest rates. The import tariffs will increase inflation. If his pro-business policies accelerate their economic growth, it will increase inflation. If his deportation immigration policy shrinks their labour force, it will increase wages, which increases inflation. This will keep their interest rates high and the dollar strong. If his tax relief plans increase their national debt, it will also keep interest rates high.
“These are bad outcomes for South Africa. Our economy is barely growing and has very little inflationary pressure. We would like to cut interest rates further but will not be able to do so if USA rates remain high and the rand-dollar exchange rate is weaker.”
Trump’s influence on the domestic fortunes of the USA might pay dividends, but his four-year term will do little to make South Africa’s economy great again.
