What does the US election mean for America's role on the world stage?
The US election campaign is already proving bitter and divisive.
What will the outcome mean for trade, industry, and foreign affairs?
The upcoming US presidential election in November will see Democrat Kamala Harris and Republican Donald Trump vying for the presidency, representing two starkly different visions for the future.
Despite the uncertainties surrounding the election, the policy divisions between the candidates are clear and significant. With less than three months to go, it's essential to understand what separates these contenders for the world's most powerful office.
What might a second Trump presidency or a Kamala Harris win mean for the US foreign policy, trade, and industrial policy?
The Trump wildcard
With Kamala Harris winning the Democratic presidential nomination and Tim Walz named as her vice-presidential running mate, there is growing speculation about how a second Democratic term might differ from Biden’s presidency and what this could mean globally. While a Harris administration is expected to maintain many of Biden's policies, focusing on continuity, there could be notable differences in approach and priorities that might shape both domestic and international landscapes. Like Biden, Harris intends to contrast her vision for America with that of Donald Trump. However, she has also expressed distinct views on various key issues, indicating that her presidency might introduce different policies or approaches compared to Biden’s. Harris is also expected to bring her own style and perspective to key economic and social matters.
While a Harris presidency is likely to build on Biden’s agenda, the wildcard here is the possibility of a Trump presidency, which is likely to be a roller coaster ride by comparison. Based on previous announcements, under Trump presidency there is the potential for blanket tariffs on imports, which would prioritise US industry at the cost of creating uncertainty in global trade. An already unfriendly relationship with China is likely to become more antagonistic still. Green targets will be shelved as oil and gas receive a boost, undermining the global transition to sustainable energy.
Taken together, Oxford Economics predicts that US GDP would be 1.3% below baseline by 2029 in the event of a Trump presidency, with global GDP 0.9% below baseline.
“Both candidates have distinct visions for the future, and their policies could lead to different outcomes for the US GDP and the global economy,” says Dana Bodnar, US economist at Atradius.
“A Trump presidency is likely to see a return to the ‘America first’ stance that characterised his first term in office. That would mean more protectionist policies, a more fragmented global economy and disruption to global trade, even when compared with the current situation.”
Trade shifts on the horizon
Regarding trade, Kamala Harris and Donald Trump have distinctly different trade policy stances, reflecting their broader economic priorities. Harris’s approach may reflect her previous criticisms of trade agreements and her emphasis on protecting American workers and the environment. If she becomes president, Harris might introduce changes to trade policy that further differentiate her from Biden’s more continuity-focused approach. This could involve re-evaluating existing trade agreements and implementing new measures that align with her vision of fair trade, while still addressing some of the protectionist concerns highlighted also by Trump’s policies. In short, Harris’s trade policy is expected to balance maintaining robust international trade relationships with safeguarding domestic economic interests.
In contrast, Trump’s trade policy has been notably protectionist, aimed at shielding American industries and reducing the trade deficit. His administration imposed significant tariffs on Chinese imports, a strategy largely maintained by Biden. But a second Trump administration will go further. Trump is toying with the idea of a 10% blanket tariff on all foreign imports, and proposed tariffs on Chinese imports of upwards of 60%. One aim of these measures would be the abolition of income tax, though this appears far-fetched. Trump is likely to retaliate in kind on any country that imposes trade barriers on US goods. The potential for trade wars - and not just with China - is real.
The intention here is to stimulate domestic US industry, but it is also likely to spur tit-for-tat retaliation and lead to higher prices for consumers. That in turn could slow down the pace of monetary policy easing in both the US and elsewhere. Increased trade tariffs would hike inflationary pressures around the world.
While Harris’s trade policy would likely focus on fair trade and environmental sustainability, while Trump’s approach is more protectionist and focused on reducing the trade deficit, both candidates will continue the policy of prohibiting investment in ‘sensitive’ technology and military sectors in China. Trump is likely to expand the number of companies on the banned list.
Foreign policy: divergent paths
Differences between the candidates Harris and Trump on foreign policy are stark.
Overall, Harris’s foreign policy is expected to balance maintaining robust international trade relationships with safeguarding domestic economic interests, while also addressing environmental and human rights concerns. Kamala Harris is likely to adopt a firm stance on China and Russia, continuing the Biden administration’s policies to counter their geopolitical influence. She is expected to maintain strong support for allies, such as Ukraine in its conflict with Russia, and to strengthen alliances in Asia and the Pacific. In the Middle East, Harris is anticipated to support Israel while also showing greater empathy toward the Palestinian situation, potentially leading to a more balanced approach in the region.
A Trump presidency would likely lead to a significant reduction in US military support for Ukraine and a more skeptical view of NATO, potentially pushing Europe to increase its defence spending. Despite threats to cut aid, Trump's policy may involve using aid leverage to drive negotiations between Kyiv and Moscow, though a swift end to the war remains unlikely. On China, the administration would focus on de-risking supply chains, especially in critical minerals and technology. Overall, Trump's approach would be more aggressive, but high tensions with China are expected to persist regardless of the election outcome.
Industrial policy: consensus and conflict
The shocks of the last few years have persuaded US politicians of all stripes to prioritise self-sufficiency and reinforce supply chains in an uncertain world. President Biden enacted three major pieces of legislation - the Infrastructure Investment and Jobs Act, the CHIPS and Science Act and the Inflation Reduction Act - aimed at stimulating US industry and enhancing competitiveness. Kamala Harris’s industrial policy is closely aligned with the broader Biden-Harris administration’s goals of revitalizing domestic manufacturing, creating good-paying jobs, and strengthening supply chains. Overall, Harris’s industrial policy focuses on creating a robust, sustainable, and innovative industrial base that supports American workers and reduces dependence on foreign supply chains. Harris’s approach is more aligned with progressive values, while Trump’s policies are more conservative and protectionist.
Under a Trump presidency regulation around clean energy is likely to be slashed. In his first term, he attempted to end bans on oil and gas extraction. We can expect more of the same from a second Trump administration. Trump’s support for oil and gas over sustainable energy could prompt an investment spree in green companies in Europe and Asia, even as it undermines global efforts to transition to clean energy.
There would also be winners and losers under either candidate as crucial supply chain industries are brought onshore or encouraged in friendly countries closer to home. For example, there has already been substantial incentives to encourage the expansion of domestic advanced chip-making capacity. A Trump presidency may turbocharge the pace of this ‘onshoring’ activity.
In a nutshell, security and self-sufficiency will be watchwords of any incoming administration.
An election of consequence
The 2024 US presidential election is a defining moment for America and the world. While Harris is expected to build on many of Biden's policies, her administration might introduce distinct changes, particularly in trade policy and domestic priorities. In contrast, a Trump administration promises uncertainty and fragmentation in the name of ‘America first’.
“This is a very important election, the outcome of which has significant consequences for business and trade around the world,” says Bodnar. “The policies of the next US president will significantly influence global trade dynamics and economic stability. Businesses around the world will need to adapt to these changes to stay competitive and seize new opportunities. Successfully navigating these shifts will be essential for maintaining an edge in a constantly evolving global trade landscape.”
Understanding these dynamics is crucial as the election approaches. The result will deeply impact trade relations and business strategies, shaping the global economic landscape. Our upcoming Payment Practices Barometer report, scheduled for release in September on the Atradius website, will provide in-depth insights into these issues. The report highlights that many US companies hold a pessimistic view of the domestic economy, considering it their primary concern. They attribute the high payment risks they face in B2B credit transactions to the current economic challenges. As businesses prepare for potential policy shifts, recognizing these risks and adapting strategies accordingly will be essential for navigating the evolving trade and economic environment. Stay tuned for our detailed analysis to better understand how these factors could affect your business operations and opportunities.
Author
Dana Bodnar | Economist, Atradius
Silvia Ungaro | Senior Writer, Atradius
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