The US is going to soon find itself in the spot that most developing economies have found themselves in the past — with one major exception, of which more later below.
Donald Trump rode to power on rhetoric of tax cuts and global tariffs, but especially on China. This is of course going to lead to a spiral of huge budget deficits, an increase in the US’s already ballooning debt and higher interest rates, which will have negative implications for emerging markets as investors take their money to US bonds.
At almost a trillion dollars, or 14% of the federal budget, interest payments are projected to increase in the coming decades. This will apply the brakes on Trump’s irresponsible plans. I suppose that is what economics does to political radicals — whether from the left or right.
I remember complaining in the 1990s about why South Africa was bending over backwards to the global economy, until my colleague Khehla Shubane explained that we would be punished by bond markets, making us fork out more money to repay our debt. The radical me could not hear it then, but I see it now.
The high interest rates will no doubt be a boon for investors in US government bonds, but trouble for ordinary Americans and emerging markets. They will result in increases in interest rates for mortgages, credit cards and car repayments. Add to those hikes Trump’s proposed mass deportation of undocumented immigrants. Given that Americans depend on these folks for food production, restaurants, hotels and all the jobs Americans will not touch, their mass expulsion will result in shortages and resultant price hikes.
America will not face the Nongqawuse moment because it is not the weaker party in this situation
The threat of inflation could be the second constraint on what Trump does in terms of fiscal policy and tariffs. American voters will not stand for it, but other countries will not just lie down and roll over in the face of US tariffs. Already, Mexico, America’s biggest trading partner, has promised to retaliate with its own tariffs. Trump blinked and issued what seemed like a conciliatory tweet about the countries’ continued partnership.
Mexico might also stop co-operating to stop illegal immigrants from South America passing through its borders to the US.
What is happening to the US reminds me of the Nongqawuse tragedy among the Xhosa people in the 19th century. About one-third of the Xhosa population died because they followed the false prophecy of a young girl that they should kill their cattle and burn their crops so that the ancestors would forgive their practice of witchcraft.
Desperation can lead to desperate acts. The Xhosa people could not explain why their cattle were dying — but as Jeff Peires and other historians have since pointed out, the cattle were dying from lung sickness.
Because they could not explain, the promise that the ancestors would bring an end to the tragedy and return with healthy cattle was irresistible. Trump’s Make America Great Again campaign promised a similar romantic future for working class white Americans — and for those black, Hispanic and others who could not bear the thought of a black woman commander-in-chief.
However, this brings me to the exception I mentioned above. America will not face the Nongqawuse moment because it is not the weaker party in this situation — which is the position the victims of Nongqawuse were in in the colonial period. On the contrary, the US is the most powerful economy in the world. The dollar remains the global reserve currency and American bonds the most liquid and tradable.
South Africa faces the real prospect of being kicked out of the Africa Growth and Opportunity Act (Agoa) partnership, which comes up for renewal next year. Republicans, and some powerful Democrats, have long been baying for South Africa’s removal because of our alliances with Russia, China and Iran — all the countries the US considers a threat to its national security. But in a tariff-based trade policy regime, Trump and the Republicans might just eliminate Agoa in its entirety.
There is, however, one silver lining, if South Africa plays its cards right. China could deny the US access to its rare earth minerals.
However, the US could diversify its sourcing of these materials — from Brazil, India, Australia, and yes, South Africa, which has some of the largest deposits of these minerals. Agoa may go but there are other opportunities — but we may also have to get rid of our almost 20% tariffs on US imports.
A fallout from bond markets, rising inflation and administrative inefficiency by an incompetent and corrupt cabinet could still determine the 2028 elections differently. We just must be able to hold our breath for the next four years and be nimble at the game we play with the US. After all, the US remains the most powerful economy in the world, with or without Trump. Just sayin’.
• Mangcu is professor of sociology and history at George Washington University
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