23 September 2024
What are the material issues that, currently, are driving the US presidential election and the potential impact on the policies set forward? At the time of writing this, Vice President Kamala Harris is poised to represent the Democratic Party against former President Donald Trump representing the Republican Party. Voters are confronted with starkly different visions for America’s future with various potential economic outcomes clouding investors’ minds. The first point to note in the run up to this election is that regardless of the result, the economy is poised for significant changes driven by policy advocation of the next president and Congress. This includes tax cuts and spending adjustments, tariffs and trade relations; all of which will have far-reaching impacts.
Kamala Harris: "Policies for Change"
Kamala Harris, who has served as Vice President under President Joe Biden’s tenure, campaigns for policies on issues such as expanding healthcare access, investing in renewable energy and addressing systemic racism. Harris is especially outspoken on her stance against fossil fuels and oil.
On the economic front, Harris emphasises support for the middle class, proposing increased taxes on the wealthy by raising corporate and capital gains taxes to fund social programs. She has also mentioned an unrealised capital gains tax for high-net-worth individuals. Her administration would likely continue efforts to reduce income inequality and enhance workers' rights, including raising the federal minimum wage and supporting unionisation efforts.
Increasing taxes may dampen economic growth., This can be counteracted or nullified if spending is executed in the correct economic geographies with the intention to boost the economy and employment.
Donald Trump: ‘America First’
Donald Trump’s campaign revolves around an "America First" philosophy, including locally manufactured goods by bolstering spending on American manufacturing. In effect he is looking to reduce dependence on foreign supply chains, particularly from China. Trump has consistently argued for maintaining and potentially increasing tariffs on Chinese imports, positioning this as a strategy to protect American jobs and industries.
Higher tariffs could have complex implications for the U.S. economy. While they may temporarily benefit certain domestic industries by reducing foreign competition, they also risk accelerating prices for the end consumer. Increased tariffs can lead to inflationary pressures as businesses pass on the costs to consumers. If elected, Trump’s trade policies could exacerbate inflation, affecting major sectors from consumer staples to technology.
Trump aims to extend tax cuts introduced by his administration in 2017. He has also announced the intention to cut corporate taxes further. This may stimulate economic growth.
The inflation debate
Inflation has been a concern for America in recent years, influenced by factors such as the stimulus or grants provided through the COVID-19 pandemic as well as the resultant global supply chain disruptions. Both candidates address this issue, despite their varying policies. Harris may favour investment strategies aimed at long-term growth, potentially stabilising prices in the short-term., Trump’s tariffs may exacerbate inflation in the short term but provide strength to the US economy over the long term.
However, both candidates’ policy strategy currently seems to be fiscally expansionary, which could lead to inflationary pressures. A potential resurgence in inflation after the US election may limit or curb the Fed’s ability to continue its interest rate cutting cycle in 2025.
Conclusion
As the election unfolds, the contrasting visions of Harris and Trump will resonate with voters in different ways. With inflation and trade policies at the forefront of economic discussions, the choice in November will not only shape the immediate economic landscape but also set the trajectory for the nation’s socio-economic future.
