President Trump…..

Trump wins in what is seen as an anti-establishment vote, a vote for the protection of jobs and anger at how Washington has ignored the middle class American.

Trump won more than 270 of the electoral votes.   The Republicans also have control of the Senate and the House of Representatives, giving them control of the US Congress.

What does a Trump presidency mean?

  • Significant tax changes and increased spending on infrastructure.
  • It is anticipated that trade policy will become much more protectionist. There is a significant risk that increased trade protection in the world’s largest economy will result in retaliatory trade measures by the affected countries.   This could result in a much more pronounced global trade war which would be bad for South Africa, given that more than 50% of South Africa’s GDP is imported or exported.
  • Trump does not support the current US monetary policy regime. It now seems unlikely that Janet Yellen will be reappointed as Chairman of the US Federal Reserve when her term ends in 2018, given Trump’s view that the Federal Reserve has created ‘a false stock market’ and that Yellen is ‘very political’.    More strangely, Trump has supported a proposal to allow congressional auditors to review the Federal Reserve’s decisions on interest rates.   This would amount to extreme political interference.
  • Trump offers a major shift in foreign policy and will certainly tighten immigration controls.

 The implications for South Africa are somewhat negative.

  • The US is one of South Africa’s largest trade partners (both in terms of imports and exports) and Trump has made it clear in his campaign that he will look to review existing as well as proposed foreign trade agreements. The economic implications are potentially far-reaching and could ultimately undermine South Africa’s ability to export to the US.
  • In terms of the direct foreign aid that South Africa receives from the US; Trump’s victory is likely to create some anxiety and concern. While Obama and Clinton have generally been sympathetic to Africa, this approach could be reviewed by a Trump administration.

In conclusion ……….

It will take time for the markets to fully digest the impact of a Trump victory and to understand whether or not Trump’s extreme rhetoric will translate into actual economic and political policy or whether the institutional strength of the US will take the best of Trump’s suggestions in order to meaningfully lift economic growth.

Source:  Kevin Lings, Chief Economist Stanlib