The world after the Trump presidency
Amid comparatively unsuccessful Covid-19 control and a surging unemployment rate, Donald Trump’s presidency might soon be over. Several polls, including those by Trump-friendly Fox News, indicate that Joe Biden is likely to win the November election. Averaging the results of 14 national polls, Mr Biden is leading with 51% while Mr Trump is behind at 43% (the rankings remain undecided for the other candidates). From state polls, Biden is leading in 10 out of 14 key states. Still, there are concerns that history might repeat itself as in the 2016 presidential election. At that time, Hillary Clinton was the front-runner and led Mr Trump in seven key states, yet she lost. Research by the United States Studies Center at the University of Sydney, however, reveals that the 2020 presidential election might not unfold the same as the previous one, due to two main reasons. First, in the 2016 polling, the number of undecided voters was twice that of the 2020 polling. Second, there are changes in voter turnout, as the proportion of whites, the majority of whom cast their votes for Mr Trump in the last election, has been declining. In fact, data from the US Census Bureau showed that in the 2018 midterm election, the voter turnout appeared to be the most racially and ethnically diverse in history. This could very well be an advantage to Mr Biden, since he picked Kamala Harris, of African and Asian descent, as his running mate. That said, the next question is: what would be the key policy changes, if he wins?
If that were the case, many actions taken by the Trump administration would be reversed. For example, under a Biden presidency, personal income tax would be raised to the Obama administration’s level and the corporate income tax would increase from 21% to 28%. Also, the minimum global tax rate on US multinationals' foreign profits would be increased to 21%. On the trade-war front, Mr Biden did not pledge to revoke the tariffs imposed on Chinese imports. Instead, he will focus on intellectual property rights and put pressure on China’s Belt and Road Initiative, which is responsible for financing billions of dollars in dirty-fuel business. The latter move would be in line with one of the platforms he is running on, the Green New Deal. The goal is to turn the US into a clean energy country by 2050.
These changes could shape the US and global economic outlook during his term in the next four years. For example, corporate tax hikes would put downward pressure on stock markets while supporting rallies in safe-haven assets such as gold. Also, the Green New Deal would impact the overall industrial sector’s profits as emission costs rise.
A few sectors could still benefit. For instance, the proposed expansion of Obamacare, if approved, might help improve margins for healthcare stocks, especially for biotech and pharma companies. Also, firms with social entrepreneurship and relatively strong ESG (Environmental, Social and Governance) ratings, such as Tesla, could reap more benefits from the US government’s incentives and subsidies under the Green New Deal. The US and China might see more integration under the agreement, as many renewable energy firms in the US are working in conjunction with Chinese companies. In addition, Mr Biden’s infrastructure plan can brighten prospects for civil engineering and construction companies.
Although Mr Biden’s policies are not as business-friendly as Mr Trump’s, we expect that the market will be stabler during his presidency because he is less likely to change political stances as frequently as Mr Trump. International relations should also be less tense, since Mr Biden’s approach to dealing with cross-border matters is unlikely to be as aggressive.
For Thailand, Mr Biden winning the presidential race has implications for the country’s economy, stemming from two main issues: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Green New Deal. First, regional trade should be supported to a certain extent during his term, as the US would be likely to join the CPTPP. Mr Biden was a strong supporter of the multilateral agreement under the Obama administration. He even declared that he would renegotiate the contract with Pacific nations in his speech during the second Democratic presidential primary debate in mid-2019. Consequently, this is likely to make the deal more appealing to many export-oriented countries, including Thailand. But implementation of the Green New Deal could increase downside risks to the Thai export sector. This is because many of the nation’s manufacturing production fails to reach the required environmental standard. For example, the total number of electric vehicles bought in Thailand at present is about 4,000. Accordingly, we expect Thai exports to the US, such as machinery and electrical appliances (23.9% of total exports to the US) and vehicles (4%), to deteriorate as demand for clean energy rises. In terms of financial markets, we predict that the US capital markets may take a hit as capital likely flows out of the US due to higher tax rates and stricter environmental regulations. That said, November is a long way away in politics. Prepare for more speed bumps in the meantime.