African winners will be those countries that pragmatically play to Trump's ego and self-proclaimed dealmaker status.
As America's election race enters the home stretch, investors and African policymakers are assessing what the November outcome might mean for the continent. Amid an assassination attempt, President Joe Biden's decision not to run, and a politically polarised environment, Donald Trump is still leading - although polls show Kamala Harris is closing the gap.
What would a second Trump presidency look like, and how could it affect African countries in terms of economics and trade?
Economically, 'Trumponomics' has three clear but contradictory tenets. First, aligned with the 'America First' mantra, protectionist and nationalistic impulses will dominate. This has significant implications for global trade. Trump has floated the idea of a 10% tax on all imports from all countries, and a tax of up to 60% on everything from China. Another trade war is almost inevitable if he wins.
Friendshoring (relocating supply chains to countries with shared values or strategic alliances with the US), reshoring (bringing production back to the US), and nearshoring (moving production closer to the US) will become key strategies. They will drive up export costs to America and potentially disrupt global supply chains.
Second, laissez-faire economics. With tax cuts and deregulation being key features of his first presidency, markets cheered robustly from 2017-19. Trump launched a fiscal bazooka during this period, which stimulated growth. However, the country's debt position now is fundamentally different, making a repeat of this strategy contentious (see chart).
Third, monetary policy independence will come under scrutiny. Trump has called Federal Reserve Chair Jerome Powell a bigger enemy to Americans than China's President Xi Jinping for continuing to raise interest rates. This level of political interference would undermine the Federal Reserve's credibility and its fight against inflation.
Global conditions have changed dramatically since Trump first assumed office in 2017. As global consultancy Roland Berger notes, the world is still dealing with the after-effects of COVID-19 and the wars in Ukraine and Gaza, significant debt overhangs, and the lingering effects of high interest rates and inflationary pressures. Adopting these policies without considering current conditions could damage an already fragile global economy.
It's unclear what the impact on growth, inflation and financial markets would be. Goldman Sachs says US trade policy under a second Trump presidency would be so unorthodox that it cannot be effectively modelled. UBS projects a 2.5-percentage-point hit to Chinese growth, while Wells Fargo says US GDP could decline. Much will depend on the House and Senate composition, which will dictate the speed, scope and intensity with which Trump and his party can further this agenda.
Geopolitically, Trump's ideas remain broadly consistent with his first term - isolationism, authoritarianism and nativism. The 'America First' mantra - railing against multilateralism - will see Washington adopt an insular approach, antagonising historical allies.
Foreign Policy notes this adversarial trade policy will make it harder for Washington to rally allies in Europe and Asia to help contain and roll back coercive behaviour from China and Russia. European policymakers are already anxious, given Trump's criticism of the North Atlantic Treaty Organization and lack of concern for Ukraine.
Then there's climate change. Like in his first term, Trump could withdraw from the Paris Agreement (a decision the Biden administration had reversed). And advocating for increased fossil fuel production contrasts with global efforts to reduce carbon emissions. Reduced US support for climate initiatives and rolling back progressive 'green' policies could undermine global climate goals and worsen environmental degradation in vulnerable regions.
Global governance could suffer too. Trump has scant regard for the international rules-based order or its institutions, which are already suffering from a crisis of legitimacy. Having boasted about his closeness to autocrats such as Russia's President Vladimir Putin and North Korea's Kim Jong Un, Trump's approach could embolden authoritarians worldwide and further reduce Washington's moral legitimacy.
So, what does all this mean for Africa? Economically, a major concern is the contagion from high inflation, dollar strength, trade friction and a more insular outlook. For example, both tariff hikes and tax cuts in the US would likely have pronounced inflationary effects on its economy, prompting the Federal Reserve to raise rates.
African policymakers, having dealt with 'dollar smile' effects in recent years (the disproportionate impact of dollar strength during times of extreme strength and weakness in the US economy), will be wary of the negative effect this could unleash on the global economy. This would again raise their debt servicing costs. With fiscal buffers eroded since COVID-19 and two wars, policymakers will have an uneasy sense of déjà vu. Bond yields, currency weakness and rising cost pressures can be expected in this scenario.
Trade-wise, African states will probably be caught in the crossfire of an escalating trade war involving their major trading partners. Sustained tensions would have a growth-dampening effect and disrupt supply chains. A more hawkish US administration could review trade arrangements such as the African Growth and Opportunity Act and pursue more bilateral trade deals, potentially undermining the African Continental Free Trade Area.
Given the narrower policy focus, investment pullbacks and cuts to donor aid are again possible. Such cuts would be devastating, particularly for climate change and healthcare, where Africa lacks resources. In this context, Africa should reduce dependency and diversify strategic alliances and trade and investment relationships.
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In his first term, Trump's approach to Africa ranged from contempt to neglect, and was generally negative for the continent. But despite the obvious headwinds, there may still be opportunities. A dispassionate assessment shows that some elements of Trump's first term were constructive towards Africa.
Prosper Africa is a 2019 initiative aimed at increasing two-way trade and investment. The programme, albeit belated, was shaped more by an anti-China and anti-Russia agenda than by genuine benevolence towards Africa. But it laid the groundwork for potentially lucrative partnerships, if African states can navigate the geopolitical realignment. Moreover, Washington's staunch anti-China stance might open doors for African markets to fill the void in global supply chains, provided they can act swiftly and strategically.
Countries with a commercial mindset, such as Kenya, that can offer the US a return on investment, and whose offerings align with the US' economic and security priorities, like the Democratic Republic of the Congo, will succeed.
African states can only control what they can, and the winners will be those that pragmatically play to Trump's ego and self-proclaimed dealmaker status to navigate an increasingly complex geostrategic landscape.
Ronak Gopaldas, ISS Consultant and Signal Risk Director
