With the United States political landscape highly polarized, it’s probably to be expected that experts, even from the same company, would also be divided on the economic and trade implications of the upcoming presidential election.
During a Fitch Solutions Country Risk & Industry Research webinar, executives from the company presented contrasting views and scenarios on the consequences of a win for Democratic presidential nominee Joe Biden or a second term for President Trump.
Cedric Chehab, global head of country risk at Fitch Solutions, said from a short-term perspective, the U.S. economy seems to be gaining some traction and the third quarter is primed for a “sharp acceleration and growth,” of up to a 30 percent increase in gross domestic product (GDP), “which could be a boon for Trump.”
This followed a 32 percent contraction of GDP in the second quarter, Chehab noted.
However, Jeffrey Lamoureux, head of Americas country risk at Fitch Solutions, said while he agrees that a strong third quarter “could offer Trump some tailwinds, the one major note of caution I would highlight is that even with a strong Q3 number, the reality on the ground is still going to feel very uncertain and challenging.”
“There’s going to be a lot of economic scarring, with many businesses closed permanently and unemployment well off its pre-crisis low,” Lamoureux said. “So, while Trump may get some benefit from a Q3 recovery, many voters are still going to feel substantially worse off than when they started the year, which will temper the extent of the benefit to Trump electorally.”
He also noted that the release of those numbers wouldn’t come until a few days before the Nov. 3 election, which would limit he benefit, especially with so many voters having already cast their ballots by mail.
Lamoureux also believes it is unlikely that Trump or Biden would look to enact tax cuts, given the bloated federal deficit and soft economy.
A Democratic party sweep of the presidency, the House and the Senate, he added, could create a window for major changes. Legislative priorities would likely include enacting additional stimulus spending, bolstering public healthcare provisions and increasing investment in infrastructure.
He and Yoel Sano, Fitch Solution’s head of political risk, said Biden’s policies would likely include reaffirming the U.S.’s unconditional commitments to allies such as NATO, Japan and South Korea, and rejoining the Paris Agreement on Climate Change.
On trade, Biden could look to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and is likely to reduce trade tensions with the European Union.
Sano also believes Biden would look to maintain Trump’s tough stance on China, “reflecting a bipartisan hardening of congressional and public opinion against Beijing in recent years.”
“China’s rising economic and political influence and more assertive foreign policy stances have come to the fore as a major concern for U.S. foreign policy makers, and many of them have increasingly started to see China as a so-called bad actor on the international stage,” Sano said.
He said that’s not likely to change no matter who wins the election. Fitch puts Biden’s chances of winning at 70 percent, which was noted fell below The Economist’s 86 percent probability and FiveThirtyEight’s 77 percent odds.
However, Sano said there’s also the possibility that Biden in some ways could take a harder stance on China, such as putting more emphasis on human rights regarding Xinjiang, Hong Kong and Tibet.