Trump's big comeback: An analysis of the United States presidential election

In this video, the economic research desk offers an in-depth analysis of the United States (US) presidential election held on 5 November 2024. Donald Trump’s decisive victory and clear mandate are poised to impact not only the US economy but also the global landscape. The team highlights notable demographic shifts in voter preferences and examines Trump’s key policy priorities based on his 2024 campaign promises. Key areas of focus include fiscal policy, trade relations, immigration, deregulation and global security. They also discuss the potential challenges to the US Federal Reserve’s (Fed) independence and concludes with insights on what the 2024 US election outcome means for South Africa (SA).

Key points from the discussion include: 

1. Demographic shifts: Increased support from Latino and Black male voters contributed to Trump's significant political comeback, allowing Republicans to secure the first popular vote in 20 years.
2. Economic impact: Trump’s second administration is likely to result in higher growth in the short run, but higher inflationary pressures, trade disruptions, fiscal concerns, policy uncertainty and potential labour market shortages are likely to act as a drag on growth further down the line. 
3. Fiscal policy: The promise to cut corporate taxes could raise concerns about the government’s ability to manage its fiscal responsibilities and undermine the US dollar. However, given the US dollar’s dominance in global transactions and global central bank foreign exchange reserves, the US dollar will likely remain the world’s reserve currency for the foreseeable future. This is especially so since the euro and renminbi face challenges in this regard, including the lack of a fiscal and political union in the case of the former and a closed capital account in the case of the latter.
4. Trade relations: Trump could leverage his executive authority to impose tariffs unilaterally. This could raise inflation for US citizens, negatively impact global supply chains and fragment global trade.
5. Immigration policies: Immigration is costly and would negatively affect labour supply given foreigners’ contribution to the US labour force. Trump could nonetheless be more effective in controlling the flow of immigrants rather than removing those that are already there.
6. Deregulation: Reducing excessive regulation where it hampers economic activity can benefit the US economy. However, if this deregulation undermines environmental protections, it could harm social well-being, particularly by weakening international efforts to combat climate change. Moreover, rolling back on necessary regulations in financial services could increase financial market instability.
7. Global security: Should the US take a step back from its role as the global policeman, Europe and Asia will likely have to ramp up military spending, leading to additional fiscal pressures. Foreign policy shifts under Trump could lead to a speedier resolution to the Russia/Ukraine and Middle Eastern wars, but this could lead to unfair concessions and could negatively affect long-term stability in those regions. 
8. Monetary policy: The independence of the Fed will likely be tested under a second Trump administration but checks and balances will ensure central bank credibility. Immigration and trade policies could lead to higher inflation, and limit the extent of interest rate cuts, leaving the end-of-cycle interest rate higher than what markets previously forecast.
9. Impact on SA: The government of national unity and ongoing structural reforms could help to shield SA growth in the medium term, but the risk of rising global risk aversion and market volatility due to global policy uncertainty could negatively affect SA in the short run.