Donald J Trump has shocked the world by becoming the president-elect of the United States. It’s an outcome few would have predicted. But in a year of Brexit perhaps we should have been less dismissive of the populist anger that now boils in the West.
Trump’s unpredictability makes it difficult to determine what his policies will actually be but a common theme in his message seems to be lower taxes, investing in infrastructure, skepticism to renewable energy and opposition to free trade and immigration.
In giving a quick take of what these could mean for Ghana, I would look at the effects of such policies on commodity prices, exchange rates, trade agreements, investment inflows and immigration.
- Gold prices. Gold has immediately recovered to about $1,300 following Trump’s victory. The possibility of the metal rising higher exists because the US Federal Reserve may not hike rates at their December meeting. This may be to calm markets spooked by a Trump presidency. However, if Trump does cut taxes and invests in infrastructure, US growth and inflation may pick up. This would raise yields on US debt and reduce the attractiveness of gold. However, in the short-term I see an upside for gold because of the uncertainty in the market around Trump. This would help bring in more revenue for Ghana, which has realized almost $2 billion in gold revenue for the first half of 2016.
- Oil prices. Trump is apparently a climate change denier. If he should seek to help US oil production, the world price may collapse because of the supply glut and that will affect Ghanaian oil revenue which was $126 million in the first half of 2016.
- Investment inflows. Given the level of uncertainty in the global political environment, it is likely that investors will not take too much risk by investing in bonds of emerging markets even if they offer high yield. With an external public debt of over $15 billion it will be difficult to refinance our debts if investors demand too high a yield because of the increase in global political risk.
- Exchange rates. The dollar is likely to be subdued for the short-term as the uncertainty around a Trump presidency weighs down on the currency. However, if he does push through his fiscal expansionary agenda I’d expect a stronger dollar and a weaker cedi as a result.
- Trade agreements. Trump campaigned against the TPP, NAFTA and other free trade agreements. The African Growth and Opportunity Act (AGOA) which allows Ghanaian companies to export duty-free to USA was extended for 10 years in 2015. African countries had exported about $480 billion worth of goods under AGOA by June 2015. Will Trump seek to cut this agreement short or renegotiate it? We’ll have to wait and see.
- Immigration. If Trump is to meet the expectations of his voters, he will seek to cut immigration into the country. And this could make it tougher for Ghanaians trying to get into the USA for whatever reason.
As the world starts to come to terms with a Trump presidency and we have an idea of what he will actually do in power with a Republican senate and house, I will write more on the effect his policies may have Ghana and even for the continent as a whole.