What Biden's Win Could Mean for World Economy
November 12, 2020 | Joyce Ibrahim
With a GDP of approximately $21 trillion, and making up 23.6% of the global economy, the U.S remains the world’s largest economy since 1871. And every four years, the world turns its full attention to the U.S, and holds its breath in anticipation to learn who will be leading it next.
Considering America’s ongoing economic and military influence, and the impact of COVID-19 and the Trump administration on trade and international agreements, the U.S 2020 elections were particularly suspenseful. And with Americans announcing Joe Biden as their 46th President, the global economy is expected to witness a shift, from trade to climate.
Here’s a glimpse into what the Biden presidency means around the world.
According to Joe Biden’s economic plans, his presidency will be focused on climate change, job creation, and stronger ties overseas. Apart from his determination to set the federal minimum wage at $15, the president-elect aims to create millions of middle-class jobs within his infrastructure plans. On the other hand, Biden’s plan to raise the top corporate income tax to 28% from 21% could cause S&P500 earnings to endure a negative 10.6% impact. Along with this measure, he plans to raise the top income tax rate back to 39%. In the longer term, however, if Biden’s tax proposals are passed, they are estimated to increase revenue by $4 trillion between 2021 and 2030.
The Financial Times described Joe Biden as “the most Atlanticist US President in a generation”, and European leaders have consistently expressed their satisfaction with the results of the 2020 elections. However, as the US Dollar had lost 8.5% against the euro since April, improving EU-US trade will mainly rely on the evolution of the dollar/euro rate in the months following the election.
While Biden had consistently insisted that domestic matters will have to be addressed before turning to foreign agreements, Europe is expected to hold more amicable relations with the US presidency. Most importantly, Biden’s administration could usher in renewed efforts to resolve disputes over tariffs, Airbus and Boeing. Furthermore, Barron’s found that a Biden win could be good news for European equity. And with a $2 trillion green energy and infrastructure plan, his administration could also give a significant boost to European companies in these fields.
In Asia, Biden’s administration may not stray too far away from Trump’s stances. Although Biden had expressed his willingness to relaunch talks for the Iran nuclear deal, commercial tensions with China are likely to remain, albeit with more predictability. On trade matters with China specifically, and the world generally, the President-elect has been vocal about the importance of “buying American. More importantly, Biden aims to launch a heavy investment plan in new technologies, pledging to “win the competition for the future against China”.
The US 2020 election results have received different reactions across the globe. And although world leaders may have initially breathed a sigh of relief with President-elect Joe Biden’s victory, contested elections and a power split between the White House and Congress could usher in further instability.
Would you like more insight on how political shifts can affect your wallet? Get in touch with Brakket Consult.