The upcoming elections are crucial as it may have critical effects on the global economy and the country’s foreign policy
The new Amundi Investment Institute report shows that the upcoming US national polls as critical since key socioeconomic issues and geopolitical policies of whoever wins the presidency will affect the lives of ordinary Americans and the country’s relationship with its allies abroad.
Protectionism takes center stage
When it comes to economic policies, the report noted, that both presidential contenders may most likely adopt protectionist policies, according to the Economy & Market report jointly written by Mahmood Pradhan (head of macro), Anna Rosenberg (head of geopolitics), and Paresh Upadhyaya (head of fixed income and currency strategy) for the institute
However, neither Biden nor Trump seemed to express eagerness to address the current issue of deteriorating US fiscal position, stated the report.
Trump is expected to announce, in the coming days, his “dramatic policy shifts,” which will include substantially higher tariffs, the increased deportation of undocumented immigrants, and attempts to dilute the Inflation Reduction Act (IRA), stated the report.
While the protectionist stance may bring some long-term yield, Amundi cautioned that as it escalates, specifically higher tariffs, there is a possibility that this may provoke retaliation.
Meanwhile, foreign trade relations are more likely to be affected by these protectionist policies but it would be different for whoever wins the seat.
“During Trump’s first term, the US adopted an activist protectionist policy, exiting the Trans-Pacific Partnership (TPP) and transforming the North American Free Trade Agreement (NAFTA) into the United States-Mexico-Canada Agreement (USMCA); Trump targeted China and allies alike with these measures. However, during Biden’s first term, the US maintained Trump's tariffs on China and expanded selective protectionism with additional measures that prevent China from accessing high technology from the West. Both candidates will likely continue with protectionist policies to varying degrees,” it said.
“Biden’s re-election would likely maintain the status quo with a targeted expansion of protectionist industrial policies. We anticipate no major changes to the existing tariff system and Biden might renegotiate the USMCA to include protections on labour and environmental issues. With no material change in direction (with the exception of more protectionism against China) we would not expect any significant economic impacts,” it added.
Geopolitics and foreign relations remain a burning issue for Biden but somehow “cold” with Trump
In the meantime, Biden is most likely to maintain his interventionist stance, especially with the issue of Ukraine and the escalating conflict in the South China Sea, according to the report.
If Biden wins the elections in November, it is expected that his government’s support for Israel will “persist,” although the stance of Israel’s government could make this increasingly difficult.
“There are many downside risks that another Biden administration could face. Despite intense diplomatic efforts to keep the crisis geographically contained, an escalation between Israel and Lebanon, as well as between Israel and Iran, remains likely and both could end up drawing in the US directly,” it noted.
While the US will maintain its support to Ukraine, there is a possibility for lesser monetary support for its cause as there is pressure on the part of Europe to take on more of the responsibility in supporting Ukraine and to use the windfall profit brought by Russia’s frozen assets.
On the other hand, the Amundi report noted that under Trump’s administration, geopolitical risks “are likely to increase as trade restrictions for both allies and adversaries will intensify the scale and scope of economic sanctions and export controls, heightening the economic frictions already playing out, and escalating protectionism and retaliation.”
