As the US election approaches, the stakes are high for South Africa and other emerging markets. A second term for Donald Trump could bring economic turbulence, while a victory for Kamala Harris might foster international co-operation. Each path presents unique challenges and opportunities for Africa, with the balance of power in the US Congress likely to shape future policies.
Financial markets previously rallied under Trump’s pro-deregulation policies, boosting stock indices to new heights. However, for emerging markets, this bullishness masks potential pitfalls. The prospect of capital flight from these riskier markets could put pressure on currencies such as the rand, complicating efforts to manage inflation effectively. Trump’s capricious trade and foreign policy could add fuel to the fire, sparking erratic shifts in investor sentiment.
Should Trump’s fiscal largesse drive US growth, inflation could rise, forcing the Federal Reserve to adopt a more hawkish stance. This would likely strengthen the dollar, pressuring emerging-market currencies such as the rand and pushing up South African bond yields as investors demand a higher risk premium. In contrast, a Harris presidency may bring stability, boosting investor confidence and capital flows into emerging markets. Her focus on wealth redistribution and green energy, however, could challenge traditional industries.
US-South Africa relations have oscillated between co-operation and tension, shaped largely by the policies of various US administrations. After the end of apartheid, these ties blossomed. Under George HW Bush, HIV/Aids relief flowed, while Bill Clinton focused on strengthening ties through trade alliances. Barack Obama further elevated this partnership, championing democracy and expanding trade opportunities under the African Growth & Opportunity Act (Agoa).
However, under Trump, relations became more transactional, as multilateralism receded in favour of direct trade and investment. The administration of Joe Biden sought to mend the frayed diplomatic fabric, re-engaging with South Africa on critical issues such as health during the pandemic recovery and climate change, notably through the just energy transition partnership.
Wind of (trade) change
Over the past decade, trade between the US and Africa has remained disappointingly stagnant at about 2% of total US trade, despite efforts to revive economic ties. Under a Trump administration, the emphasis would likely be on individual trade deals with African nations. In contrast, a Harris presidency would likely strengthen broader initiatives such as Agoa, under which South Africa could continue to enjoy favourable trade terms, particularly in automotive exports and agriculture.
Should Trump secure a second term, however, his “America First” agenda would be strengthened. His previous administration, with its scepticism regarding international institutions, prioritised bilateral trade deals over multilateral agreements. As a result, emerging markets such as South Africa might again find themselves at the sharp end of his populist policies. Trump’s antagonism towards China could inflame a bruising trade war, with ripple effects that could ensnare South Africa, given its Brics affiliation.
Yet, even with the uncertainty of a Trump return, South Africa could find economic opportunities. His push for energy independence may boost coal demand, benefiting one of South Africa’s key exports. His deregulatory stance could also spark a short-term rise in global investment sentiment.
Conversely, a Harris presidency would prioritise climate action and renewable energy, aligning with South Africa’s green transition. However, stricter climate policies could lower fossil fuel demand, hurting our resource-heavy economy.
A Harris victory would open the door to a revival of multilateral, progressive diplomacy, ensuring Africa’s place at the global table. With Harris at the helm, Africa’s health care, education and infrastructure sectors could receive a major boost. Her co-operative approach would also breathe new life into institutions such as the World Trade Organisation and the International Monetary Fund, smoothing the way for emerging markets to tap into much-needed financial support.
A more predictable approach to global security could ease price pressures. Resolving hot-button issues in the Middle East and Ukraine might cool oil prices and provide relief to inflation-weary economies. However, Trump’s penchant for upending global norms — whether through tariffs or abandoning multilateral efforts — could fuel fresh uncertainties. His hard-nosed encouragement of Israeli military action in Gaza might spark a broader conflict, leaving any fragile peace in the region teetering on the edge.
As the US election looms, South Africa’s future in the global economy will be defined not by who ascends to power, but by how the country chooses to engage with the changing tides. Whether it’s navigating Trump’s unpredictable trade policies or leveraging Harris’s multilateral approach to drive growth and sustainability, South Africa’s path will depend on strategic foresight and adaptability. This moment offers an opportunity — to not just weather the storm, but to carve a stronger, more resilient role in the global arena.
Packirisamy is chief economist at Momentum Investments Group
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.