The U.S. presidential race always garners global attention because the candidates not only have different visions for the U.S. but also significant attitudes on global matters.
At the start of 2020, America entered the election year on a strong economy and the lowest unemployment rate in 50 years. This put its current president Donald Trump in a strong position. However, the coronavirus pandemic has brought far-reaching economic disruptions. America has also seen a decline in confidence concerning its dominance in the world economy and its influence on international affairs.
Since the 2016 election, America’s global standing has declined. According to a recent Pew study, ratings for the U.S. are at a record low.
However, the world continues to watching the U.S. election because inevitably it does the results will impact it in various ways.
Across the globe, one of the biggest risks is the effects the immediate future following the election will have on global stock markets. Any contested results or a delay in counting will lead to uncertainty, something which will send shockwaves, albeit temporarily, across global markets.
Recently, Steen Jakobsen, Saxo Bank’s chief economist told CNBC news: “We fear that the U.S. election is the biggest political risk we have seen in several decades.”
Decreased world trade
In his move to bring back jobs to the U.S., President Trump embarked on an aggressive trade policy that led to a trade war with China. He accused China of manipulating its entrance into the World Trade Organization to take advantage of the U.S. and largely blamed China’s ability to hurt American workers on previous negotiations by U.S. leaders.
Last year, he also called out the European Union for trade barriers placed by them and said they were worse than the Chinese.
Both the European and U.S. economies stand to lose a lot. Data from 2019 shows that Europe exports more to the U.S. at a value of €384 billion, whereas U.S. exports to Europe were lower at €232 billion. The profits of U.S. tech giants are significantly boosted by the E.U., and a trade war between the two would not benefit the U.S.
Effects of U.S. tax policies
Many fear that if Biden were to win, he would implement tax hikes. This would not only hurt growth in the U.S. but will also harm global and European economies. On the other hand, some feel it will lead to a weaker dollar and better performance for equities in other markets.
Trump is known for his support of the use of fossil fuels and withdrew from the Paris Climate Agreement. During his term, he has also taken steps to scale back several climate change regulations. Biden has spoken of his ambitious plan for America to transition to a green economy. Climate change affects the whole planet, and as one of the biggest economies, America’s participation in the global effort is significant.
Trump and Biden might differ on their foreign policy, but their views are important because they affect relations with trade and their defense alliance partners. Depending on who wins, expect developments in North Korea, the Middle East with the withdrawals or partial withdrawal of troops, Iran, China, Russia, and the NATO alliance.