Taking to the podium to deliver his victory speech on Wednesday, Donald Trump didn’t mince his words in outlining his position: he’s all about looking after the people of America first and everyone else must fend for themselves.
As the biggest economy in the world – contributing around 23% to the global GDP – Ian Cruickshanks, chief economist at the Institute of Race Relations (IRR) says the American economy is self-sustaining enough to be able to isolate itself from the rest of the world, which he says is “potentially negative for South Africa”.
With all of the uncertainty surrounding Trump’s presidency, Cruickshanks says that the stock market is potentially at risk and he says people should hold off from investing for now until the markets calm down and there’s more policy clarity.
READ MORE: Donald Trump wins USA elections
Novare Economic Strategist Tumisho Grater says following the shock Brexit vote earlier this year, Trump’s victory is being perceived as a further strike for populism.
“There is a lot of pressure on the globalisation status quo and, because the transition to increased global trade was not efficiently managed, it contributed to a large structural displacement of labour and growing inequality. This popular discontent with wage growth, income growth and job loss has changed the political landscape,” he says.
The biggest issue that emerging markets will be looking out for are any potential changes to free trade agreements, which SA currently is a benefactor of, or, worse case scenario, a pull-out all together.
“There will be a big focus on the policy agenda under the Trump administration and the most obvious issue for emerging markets is trade, as Trump has vowed to renegotiate the North American Free Trade Agreement (NAFTA). We do, however, still await to see more details on policy implementation given that his campaign was light on specifics,” says Grater.
“Even with a Republican House and Senate, it is difficult to see what form future polices may take. It is worth mentioning that the president does have the authority to unilaterally pull out of NAFTA, which could see trading relations revert to pre-treaty norms.”
The rand has already reacted to Trump’s victory losing between 30 to 40 cents to the dollar on Wednesday morning, while the Mexican peso- which has widely been regarded as a proxy for Donald Trump’s chances – lost over 10% of its value against the greenback.
“Emerging market currencies will once again face some turbulence, which may severely dent the return profile of local-currency bonds. The market uncertainty has led to a rush into safe haven buying, as gold surged over 5%. However, on [the] whole, the market’s initial [reaction] to Donald Trump’s surprise victory was not received as negatively as the Brexit vote,” Grater says.