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SIMON BROWN: I’m now speaking with Bastian Teichgreeber, Chief Investment Officer at Prescient Investment Management. Thank you for being here, Bastian. In light of president-elect Trump’s inauguration on January 20th, many are questioning how his administration will affect global trade policies. While he has certainly stirred up conversation with his comments on tariffs, do we have a clear understanding of what to anticipate once President Trump takes office?
BASTIAN TEICHGREEBER: Thank you for having me, Simon, and good morning. Yes, there has been extensive discussion surrounding tariffs. There are significant concerns, especially given Trump’s wide-ranging tariff threats towards different countries, which could severely affect global trade—particularly with Brics nations, having implications for us in South Africa.
That being said, we must proceed with caution. Trump is known for his transactional nature and is aware that tariffs can impede growth, affecting both foreign nations and Americans. Therefore, it remains unclear whether he will enforce all the tariff policies he has alluded to.
SIMON BROWN: You raise a good point. When he previously threatened Mexico and Canada, it felt more like a negotiation strategy rather than a sincere intention of enacting a 25% tariff. His transactional tendencies seem evident, with some experts in China noting that they find Trump’s approach manageable.
BASTIAN TEICHGREEBER: Absolutely. Historically, it’s been indicated that Trump’s presidency would bring greater uncertainty compared to Biden’s potential leadership. However, I’m not completely convinced that’s the case. Trump is indeed strategic and transactional; he genuinely aims for the best outcome for the American populace, which is understandable.
For us in South Africa, aligning ourselves with his policies might be the best approach. Initiatives like supporting an independent Brics currency or moving away from the dollar may not be effective, given that he will likely continue to utilize the dollar’s strength and its position as the global reserve currency.
SIMON BROWN: Doesn’t that pose a contradiction? Trump supports a strong dollar, yet a weaker dollar could potentially benefit the U.S. economy?
BASTIAN TEICHGREEBER: Yes, while a weaker dollar could be beneficial in the long run, generally, Trump favors a strong dollar. Moreover, the U.S. economy is currently less dependent on exports; it’s predominantly driven by consumer spending, which enables it to maintain a strong dollar. Hence, that’s the trajectory we’re on.
The policies he is expected to implement, such as tariffs and fiscal expansion, should support the dollar, which has already displayed signs of strengthening—suggesting that Trump’s policies could indeed reinforce the dollar’s resilience.
SIMON BROWN: So, is it accurate to say that a stronger dollar, driven by Trump’s policies, will inevitably result in a weaker rand, especially considering much of this is already factored in?
BASTIAN TEICHGREEBER: It’s not quite that straightforward, to be honest. The South African economy is heavily interconnected with global growth. Typically, our currency performs well when the global economy flourishes. Many of Trump’s policies may help stimulate growth.
Considering his efforts to deregulate U.S. businesses and reduce taxes to enhance consumer spending, that may lead to improved global growth prospects, which could positively affect the rand as a high beta currency.
Therefore, it’s possible for both a stronger dollar and a stronger rand against other currencies to coexist.
SIMON BROWN: One final thought—geopolitical tensions remain a major concern, particularly with ongoing conflicts in Ukraine, Syria, and the Middle East. Investors in Europe, especially, are undoubtedly keeping a close watch.
BASTIAN TEICHGREEBER: Absolutely. I agree that geopolitical tensions are likely to bring significant risks as we approach 2025. It appears that uncertainty will remain a prominent theme, especially since the situation in Ukraine shows scant signs of resolution. That reality is concerning.
While Trump has made bold promises regarding conflict resolution there, what will ultimately occur remains uncertain, but we need to monitor these escalating tensions closely.
SIMON BROWN: You’ve made an insightful remark. Uncertainty is indeed a persistent factor, and unfortunately, it seems that the issue in Ukraine will endure for quite some time.
Thank you, Bastian Teichgreeber, Chief Investment Officer at Prescient Investment Management, for your insights today. I appreciate the thoughtful discussion.
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