By: Rashaad Tayob, Macro Strategist and Portfolio Manager at Foord

With a popular vote win and control over Congress, Trump returns with both the authority and experience to implement significant changes. Unlike his previous term, he is now positioned to push for more decisive policy shifts, supported by a strong VP and allies like Elon Musk and Vivek Ramaswamy.

That said, Trump inherits a complex economic situation with a $2 trillion deficit, representing close to 7% of GDP, and a national debt level of 120%. The US faces an impending debt crisis, with a focus now on curbing spending rather than increasing it. Reducing the deficit may act as a drag on the economy, a stark contrast to the stimulus spending that characterised Trump’s first term.

This is according to Rashaad Tayob, Macro Strategist and Portfolio Manager at Foord, who provides the following insights following Trump’s election win:

·       Trump’s geopolitical stance and trade policies
Known for his anti-war stance, Trump has suggested he will end the Russia-Ukraine conflict swiftly, in contrast to Biden’s interventionist team. Domestically, Trump’s proposed across-the-board tariffs, including over 60% on Chinese imports, could impact global trade, affecting South African trade dynamics and investor sentiment.

·       South Africa’s trade implications
With 10% of South African exports going to the US, new tariffs could affect trade under the African Growth and Opportunity Act (AGOA). However, South Africa's balanced trade with the US may soften the blow compared to nations more heavily dependent on American imports and exports.

·       Interest rates and potential Fed pressure
The Federal Reserve is expected to cut rates, with market expectations of a reduction to 3.5% by next year. Trump has expressed interest in influencing rates further, potentially pushing for even greater cuts to stimulate domestic growth. Pressure on the Fed may increase ahead of Jerome Powell’s term ending in 2026.

·       US dollar and its role in global trade
Trump aims to maintain the dollar's reserve currency status while supporting a modest dollar devaluation to bolster US industry. This shift could influence South African exports by making American goods more competitive.

·       Immigration policy and economic impact
With illegal immigration being a key issue under the Biden administration, Trump is likely to enforce stricter immigration policies. A reduced labour force could push wages higher, potentially reintroducing inflationary pressures to the economy.

·       Inflation risks
Upside inflation risks loom due to potential spending increases, a stronger stance on immigration, and aggressive trade policies. Any rise in inflation could challenge the Fed’s rate-lowering approach and impact markets globally.