The Trump World: How it impacts the interest rate in South Africa

The post President-elect Trump world is a worrying concept to many, with many thinking the markets will fall and others thinking the US economy will boom, we take a look at what all this means for South Africa as well as our ever delicate interest rate and exchange rate. At this point it is difficult to say exactly what the future, featuring president Trump, will hold for South Africa, but it is sure to be a bumpy ride as we solidify ourselves as the most volatile currency around.

Trump on Africa

Trump has never held a high view of Africa, especially of us in the South, often shining a misinformed light on the “dangers” of our “terrible situation” – while things may be bleak, trust Trump to exaggerate the stereotype. When outlining his foreign policy in April, Trump skipped out Africa all together, bringing no mention of what will happen to the important and extensive economic, political and military ties to the lush continent. If these were compromised, there would be huge implications for future international dealings.

The Export Game

Known as a man against trade deals and especially free trade agreements, Trump’s presidency could mean trouble for many farmers and business who rely heavily on trade with the US to support their industry – the US is one of South Africa’s biggest trade partners. Impacting the interest rate and currency strength, losing out on trade deals like this could have huge repercussions for South Africa as well as the larger continent. The African Growth and Opportunity Act allows South Africa to trade with the US tax-free, creating more than 62 000 jobs in the process, but under a Trump reign this deal could be a thing of the past.

Changing Climate

Something that looks to be pushed off the global agenda with Trump in charge, climate change is seen by the soon-to-be president as a “hoax” made up by the Chinese to sideline American industry. What will be a huge loss to the environment, Trump looks set to pull out of the Paris Climate Agreement which took almost 20 years to negotiate. While the agreement does stipulate that a signatory may not pull out within four years, there is concern that Trump will choose to just ignore the agreement all together. Vowing to cut all “wasteful climate change spending”, the president-elect could hinder the global climate change reduction efforts that have taken decades to put in place.

The Haywire Rand

Many currencies went into a free-fall after the Trump announcement, but none more so than the South African Rand and the Mexican Peso. Only time will tell if the Rand will strengthen again, but with the possibility of a weak dollar, fluctuating markets and probable global recession, this could mean less investment in emerging markets like South Africa. With an ever fluctuating interest rate and exchange rate, the Rand is set for a very unsure future…let’s call it Schrodinger’s Rand, it is both strong and weak until you look at it. This could be catastrophic for those already feeling the inequality of wealth and wealth distribution in the country.

While a future with Trump at the helm is a daunting prospect, only time will tell what he really has in store. Whether he goes back on more controversial stances or continues to defy public opinion, either way he will be the next commander and chief of the USA.