With Donald Trump re-elected as US president, backed by strong Congressional support, South African investors may face new challenges and opportunities. Trump’s focus on cutting the US’s large $2 trillion deficit and pushing for strict trade policies could impact economies around the world, including South Africa.
How US trade policies may affect South African exports
Rashaad Tayob, a macro strategist at investment company Foord, explains that Trump’s plans to increase tariffs on imported goods may impact South African exports to the US.
Currently, about 10% of South African exports go to the United States, and a good portion of this trade is protected by the African Growth and Opportunity Act (AGOA), which allows certain African countries to export goods to the US without heavy tariffs.
Tayob points out that if Trump introduces high tariffs, it could affect South African exports, although South Africa’s balanced trade with the US might soften the blow compared to countries that rely heavily on the American market (Tayob, 2024).
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Interest rates and what they could mean for South Africa
The direction of US interest rates under Trump is another point for South African investors to watch. According to Tayob, the US Federal Reserve is expected to cut interest rates, with the possibility of rates dropping to 3.5% by next year.
Trump has indicated he might pressure the Federal Reserve to lower rates further, which could affect global markets, including South Africa’s. Tayob suggests that any changes in US rates could create economic ripple effects worldwide, potentially influencing investment returns and borrowing costs in South Africa (Tayob, 2024).
Possible dollar devaluation and its impact
Trump’s economic plans could also include a slight weakening of the US dollar to make American goods more competitive. Tayob explains that a weaker dollar may lead to tougher competition for South African exports, as US goods become cheaper in global markets.
This situation could affect South African businesses that rely on exports to the US or other international markets where they compete with American products (Tayob, 2024).
How Changes in US Immigration Policies Could Raise Prices
Under Trump’s administration, stricter immigration laws are expected, which may lead to fewer workers in the US job market. Tayob notes that a smaller workforce could drive up wages in the US, potentially leading to inflation.
Higher inflation in the US could affect global markets, including South Africa, as rising prices might influence international trade and investment decisions (Tayob, 2024).
Donald Trump’s policies could have mixed effects on South African investors. His trade policies may affect South African exports, his influence on US interest rates could impact the global economy, and a weaker dollar might create challenges for local exporters.
As the global economy shifts, South African investors will need to keep a close eye on these developments.
