Parsons concerned Trump’s victory will result in volatility, uncertainty in emerging economies

While the decisive American election mandate, which has seen Donald Trump being all but confirmed as President elect in the US, has strengthened political certainty within that country, it has heightened market volatility and uncertainty elsewhere, including among emerging economies, North West University Business School economist Professor Raymond Parsons has said.

In commentary he shared on November 6, he said the pivotal and definitive outcome of the historic US elections for control of the White House and Congress had wide-ranging implications for the US economy, as well as the rest of the world.

“The American electorate has spoken. The clear focus by President-elect Trump will be mainly on the US economy,” Parsons said.

He noted that the US financial markets and dollar had strengthened in the immediate aftermath of the elections but that the rand, for example, had already weakened.

“Policy uncertainty may eventually prevail over political continuity in current global economic outlook. Political rhetoric will eventually be converted into policy outcomes by the Trump administration next year, such as heightened protectionism,” Parsons said.

Among the more tangible immediate policy commitments by a Trump Presidency are a general US tariffs imposition of 20% on all imports and as much as 60% on imports from China.

“As a small open economy, South Africa has a vested interest in the multilateral trading system. Of importance to the [domestic] economy of a Trump victory and the prospect of higher protectionism are therefore the greater risks to South Africa’s overall exports in general and also whether it will eventually affect the African Growth and Opportunity Act duty-free benefits in particular,” Parsons commented.

In light of the latest political changes in the US, Parsons said South Africa would need to redefine its economic diplomacy with the US in ways that safeguarded the basic shared economic interests that we still had with the economic powerhouse, irrespective of political changes there.

“This is also embedded in former President Thabo Mbeki’s recent call for South Africa to review and adjust its foreign policy stances in the light of major shifting geopolitical trends in general.

“Nonetheless, irrespective of the outcome of foreign elections, South Africa’s Government of National Unity must continue to prioritise implementing the right domestic policies needed to build South Africa’s economic resilience,” Parsons said.

He stated that the way to offset any adverse external trends was to ensure that South Africa’s economic house was in order, so as to achieve higher inclusive growth.