Well for starters if it falls off, it could hurt itself quite badly. It is also putting more pressure on the soft food pads due to the smaller surface area it is having to distribute its weight over, especially when standing on two feet as in the photo (where the pressure on those two feet is 4 times more).
And finally over the long term it could have an effect on its feet as the pads wear away due to the harsh metal surface, just like in penguins.
@Micah Satvedi the stick is probably for self defence if the elephant gets angry or afraid and decides to charge or trample the keeper rather than to hit the elephant if he does the trick poorly
But it could well be interpreted in the latter way, which is why it probably isn't great to promote these things, especially with the 'animal rights' associations breathing down our necks.
Equally, as has been pointed out earlier, it adds an extra dimension of risk to the keeping of an elephant, as it increases stress levels in them and therefore makes them more likely to be hostile to a keeper, especially a volatile young bull.