What the Trump?

If the US president-elect makes good on his promises, SA will be hurt

It’s the morning after and the world remains in a state of disbelief: Donald J Trump has been elected president of the United States. Parts of the markets were lifted by the news, other parts dipped, but mostly they appeared paralysed by the quintessential WTF moment.

Money rushed into safe havens such as gold, and resource shares were also lifted. The dollar weakened, as did emerging market currencies. At first the rand lost 50c to the dollar and the JSE shilly-shallied as it tried to come to terms with the implications but ultimately closed higher, supported by a rally in mining stocks.

In the United States, exchanges boomed as healthcare, banks and private prison stocks surged and the Dow Jones industrial average closed at a record high.

“The reaction so far has been surprisingly limited especially compared with the post-Brexit reactions,” said Peter Attard Montalto, the emerging markets analyst of Nomura.

In a note by City Index’s Kathleen Brooks, she said it was likely that traders “have no idea how to price in his victory as we have no precedent for someone like Trump”.

Although he is likely to have the support of a Republican-dominated Congress, it does not mean that his political party fully supports his policy approach. “He is going to have to work hard to unify his party, and will have to accept some compromises in getting his policies approved,” said Kevin Lings, the chief economist of Stanlib.

Trump had an advantage because of a weak opponent, Hillary Clinton, who trounced Bernie Sanders — who arguably had a better grip on growing inequality in the US — as the Democratic candidate. Presumably disenchanted with their options, only 50% of the electorate voted.

But it is likely that Trump’s strident promise of change clinched the deal, and it seems that he will deliver on that. But whether it will be for better or worse has yet to be seen.

“Trump’s victory … is likely to bring a set of policies that diverge sharply from those of the prior administration,” said Robard Williams, a senior vice-president of the US-based credit ratings agency Moody’s.

It identified five key areas where the new administration’s policies will most likely have an effect: international trade, financial regulation, healthcare, immigration and corporate taxes.

Trump’s plans to renegotiate trade relationships with its largest trading partners — China, Canada and Mexico — and to impose severe tariffs on imports from some countries to force concessions on existing trade agreements could disrupt US trade and could be negative for sectors such as vehicles, oil and technology. But it could be positive for industries such as steel, which face severe import competition, Moody’s said.

There is also concern about how Trump might view South Africa’s inclusion in the African Growth and Opportunity Act, which gives the imports from those included preferential access to the US market. But of greater concern is that a protectionist approach to trade from the US could spark a global trade war, which