It remains to be seen whether Donald Trump’s electioneering bark is more than his sound bites, and whether his “pledges” to impose unilateral tariffs, says the writer.
Regions and countries all over are scurrying to decipher any potential economic, financial, and security implications for them following President-elect Donald Trump’s stunning landslide election victory on November 5.
As if that was not enough executive empowerment by a quirky American electoral system only which the founding fathers were privy to. The reality is that with the strong possibility of the Republicans (nay Trump) enjoying a majority in both Congress and the Senate, thus controlling the entire legislative process, Trump’s policy power has received an unassailable energising boost even before he assumes his executive duties on January 20.
As COP29 unfolds later this week in the Azeri capital, Baku, what are the pathways for his environmental and energy policies in the context of his campaign pledges to the oil and fracking industry to “drill, baby, drill” and overhaul US energy and fossil fuel policy?
Don’t be surprised as other key appointments are unleashed especially relating to the State, Treasury, Trade and Commerce, and Defence departments, which may directly affect foreign allies and foes alike.
For South Africa, for instance, the looming elephant in the room is its membership of the African Growth and Opportunity Act (Agoa) Programme, which gives some 30-odd sub-Saharan African member countries tariff-free access to the US markets on over 6 800 products. Pretoria’s accession to Agoa expires on September 30, 2025, and the GNU and the Solidarity Movement have been aggressively lobbying the US Congress and the Senate over the last year for an extension of South Africa’s membership for another decade.
Trump is a free trade sceptic who is driven by his penchant for sloganising the most complex of issues into bite-size populist rhetoric – “making America great again” and “putting America first”. That trade globalisation has failed to deliver especially in mitigating the effects of the global cost-of-living crisis, preceded by the financial crisis in 2008, the global Covid-19 pandemic starting in 2020, the conflict in Ukraine and the disruptions to trade supply chains including food staples and trade routes in the Red Sea and Panama Canal which disproportionately affect the developing countries, is not a moot point.
Successive US administrations have been rightly incensed by the lack of market access to China, India and Japan in key segments and over intellectual property violations. Albeit US protectionism in the form of illegal subsidies to farmers and through the lack of access to the financial market under the guise of overbearing compliance registration processes of foreign banks, the extraterritorial imposition of asset freezes, a ban on access to do business in the US dollar, and a resort to a sanctions regime either on individuals, agencies and governments in pursuit of foreign policy and national security objectives – all under the provisions of the latest variant of the Patriot Act and the Ofac (Office of Foreign Assets Control of the US Department of the Treasury), are also part of a dysfunctional global trade ecosystem.
No wonder International Monetary Fund (IMF) managing director Katarina Georgieva has been warning against the fragmentation of the global system especially in trade and sovereign public debt, which is expected to exceed $100 trillion (93% of global GDP) in 2024 and to keep rising through the end of the decade (approaching 100% of GDP by 2030).
It remains to be seen whether Trump’s electioneering bark is more than his sound bites, and whether his “pledges” to impose unilateral tariffs on all goods imported into the US of 10% to 20% to reduce a burgeoning trade deficit, and in the case of China an exceptional targeted 60%. Some stress that this will inevitably lead to a trade war, on the back of the latest IMF forecast of a resilient economy with GDP growth projected at 3.5% this year into 2025, but with the medium-term outlook far less encouraging. In the above context, it is important for South
Africa and sub-Saharan African cohorts not to allow their relations with a second-term Trump Administration to be defined by and reduced to the dichotomous angst of real and future potential benefits of Agoa. That could put them in a political straitjacket of unintended consequences.
Talk of Pretoria reflecting on its economic policies and political alignment largely by neo-liberal pundits, especially in its relations with Moscow and Beijing, and its proceedings in the International Court of Justice (ICJ) against the Netanyahu regime in Israel to the chagrin of the Trumpistas, is predictable.
The reality is that Africa has never been a key priority for successive US administrations going back the last few decades. They flirted with the rising continent not based on primus inter pares (first among equals), but on the requirements of political expediency and national interest. Biden’s Treasury Secretary Janet Yellen genuinely tried to boost links with selected sub Saharan African countries, especially South Africa.
But it was too little too late to make any meaningful impact.
She was particularly passionate about the empowerment of South African women in their role in the Just Energy Transition Programme, which is largely funded by the US, UK and the EU.
The fact that Trump is reportedly considering Robert Lighthizer, an arch protectionist and free trade sceptic who led the tariff war with China as the US trade representative, as treasury secretary will raise concern among all the US trading partners.
As the self-styled “greatest” deal maker of all time, it is no mystery that the president-elect is results driven, but at what cost, as his policy towards Ukraine demonstrates, expecting Kyiv to concede territory to the Kremlin in return for peace. It remains to be seen how this factors into Trump’s anticipated tariff war with China and the fact that Beijing has close relations with Pretoria and is the largest investor in Africa. Never mind the threat of a trade war, will there be a new scramble for Africa?
South Africa and the African Union are more powerful than they think they are. Trade and investment parochialism never wins because it is an inevitability that the post-Bretton Woods dispensation will be transformed. It may still take a decade or two. But the structure of global capital ownerships has dramatically shifted to the Chinese and the Middle East nations.
According to Barclays private bank, Barclays Africa, there is some $2 trillion of African private capital especially in its three largest economies – Egypt, South Africa and Nigeria.
The US would also ignore the lure of the African Continental Free Trade Area (AfCFTA) that covers 54 countries and a 1.4 billion consumer market, at its peril.
That is why AfCFTA, still experiencing teething problems relating to cross border transport, ratification of regulations, underdeveloped infrastructure and capacity, must show greater urgency and unity of purpose in a spirit of ubuntu economics ensuring that no one gets left behind in African development.
Africa has one other trump card –an abundance of platinum group metals (PGMs) and critical minerals (lithium, manganese, nickel, cobalt), for which global demand from the US, China and the EU is seemingly insatiable in the rush towards EV batteries in the transition to clean energy.
The IMF estimates sub-Saharan African holds 30% of proven critical mineral reserves; the Democratic Republic of Congo (DRC) accounting for over 70% of global cobalt output and South Africa, Gabon and Ghana accounting for over 60% of global manganese production. South Africa is home to 89% of global PGM reserves; and PGMs accounted for 9.7% of South Africa’s total exports in 2023, of which a quarter of PGM exports went to the US.
Pretoria’s relations with the US over the next term will primarily be defined by its ability to make sovereign decisions in foreign policy, memberships of trading and power blocs, deciding who your friends are, and having alternative policies on geopolitical and climate-related issues.
* Parker is an economist and writer based in London
Cape Times
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