A second term for US president Joe Biden would be unlikely to yield a new trade deal for the UK, while a victory by former president Donald Trump could lead to a spike in tariffs on imports, according to analysts from the Economist Intelligent Unit (EIU).
Speaking on an EIU webinar, analysts predicted that Biden would narrowly win the 2024 US presidential election.
“The race is extremely close”, said Andrew Viteritti, commerce and regulation lead at the EIU.
An expected-to-improve economy, wider electoral coalition and a significant fundraising advantage are among some of the reasons behind Biden’s predicted victory, although the result is still expected to be close.
“It’s important to recognise that the polls can only tell us so much,” said Viteritti, noting the constantly changing and narrow polls.
CHIPS, infrastructure and inflation acts
If victorious, Biden is expected to defend his key legislation, such as the Inflation Reduction Act, the CHIPS Act and the Infrastructure Investment and Jobs Act.
The Inflation Reduction Act has had a particularly large impact on international supply chains as companies move to take advantage of the subsidies offered by the legislation.
“We think that these are going to thrive under a second Biden term,” said Steven Leslie, principal global economist at EIU.
Trump’s aims
The US entered into lengthy negotiations with the EU over the treatment of European companies, while Canadian and Mexican manufacturers benefited from the rules which treated them the same as their US counterparts.
Trump is not expected to take an axe to the entire plan, but to remove some parts. This would include clean energy measures, even when it would hit the battery and wind farms that have sprung up in traditionally Republican states like Georgia, Louisiana and Texas as a result of the act.
“[Trump and his allies] are going to try and get rid of those subsidies, and take the emphasis back to fossil fuels and away from green energy,” said Steven Leslie, principal global economist at EIU.
Friend shore v going solo
In relation to foreign affairs, Viteritti said there was common ground between the two, as “both will likely continue a protectionist streak that has developed in US policy over the last decade”.
“That means, regardless of who wins, we would not expect the US to, for example, join major free trade groups like the Comprehensive and Progressive Agreement for Trans Pacific Partnership or expand the trade components of other economic partnerships.”
However, Biden is expected to “continue to nurture more ties with existing trade partners” whereas Trump “could take a more transactional and antagonistic approach to trade relationships”.
Biden’s ally-shoring agenda would benefit Canada and Mexico, with the latter expected to cement its position as a regional industrial hub.
Trump’s stated position is to impose a 10% tariff on all imports – it is currently 3% for most non-Chinese goods – and sees trade in a completely different light, said Viteritti.
“Tariff threats and erratic trade policy would be highly disruptive to US trade and investment.”
One key prediction was that, as part of his spending plans, Biden is expected to rebuild the Key Bridge in Baltimore in advance of insurance payments, speeding up a process that is expected to take months, if not longer.
China
“Very few policymakers in the US any longer believe in the decades-long policy of engaging with China," Leslie explained, pointing to previous foreign policies that emphasised mutual cooperation.
Recently, China's Russia alliance and Xi's policies have put an end to this, with other ongoing tensions over technology sales, Taiwan and the South China Sea.
There are "no present signs that [Biden] would shift" his policy, said Leslie, noting the experienced corps of foreign policy staff that would be working under Biden, who is a long-time veteran of foreign policy.
A former vice-president under Barack Obama, Biden currently pursues a co-ordination policy with allies and a “de-risking” approach to global supply chains, while reaching out to Beijing on certain issues like drugs and immigration.
Trump, on the other hand, would be “very likely to escalate tensions with China. He's always had a very hostile relationship with China.” His approach may not involve working with allies South Korea or Australia, and the possibility of even higher tariffs being imposed should not be dismissed, said the EIU’s analysts.