Joe Biden campaigned upon environmental issues, tax reform and the need to “restore America’s credibility and influence abroad.” Now that Biden is the US president-elect, how will this affect the world economy? Many economists and political theorists have many different theories, with varying suggestions of how countries and companies will react now that Biden is president-elect.
What Biden means for Canada’s Economy:
Canada has a deep and longstanding relationship with the US, one that has been mostly positive, but there are things that are not positive within our relationship. Things will not turn all positive now that Biden is in office, there will still be controversies but to a hopefully lesser scale. Biden’s current foreign policy priorities will not be on US – Canada relations, they will be stabilized but not completely conflict-free.
It can be predicted that some tariffs may even be lifted or changed to have. More equitable trade. When Biden talks about tightening trade and ‘made in America’ his focus is not on Canada, but instead, it is on emerging markets, primarily China. It can be predicted that Biden will continue Trump’s legacy on ensuring china be fairer in its international trade.
One concern for Canadians is the oil industry. Biden has made public comments and commitments to stop the Keystone XL pipeline, which will have a major impact on Canadian oil producers. It is unlikely he will be against fracking as one of the key states he won was Pennsylvania, in which there are many jobs tied to energy, including fracking. It will be more likely he will push for renewables instead of outright attacking the entire oil industry, yet his comments on pipelines do remain a concern for the Canadian oil industry.
What Biden means for Emerging Markets:
Emerging markets are relieved that there will be more stability in trade now that Biden is president. Emerging markets assets rallied on news of Biden’s victory; while equities, bonds and currencies register strong gains. However, the question of how Biden’s presidency will approach the trade war with China is up in the air. Experts predict that Biden will continue curbing China’s development as both republicans and democrats are in favour of restricting trade. It is unlikely that the Democrats will reverse trumps foreign trade policies towards China and will continue to switch to domestic production in favour of heavily relying on supply chains in China. This will have a long-term negative impact on emerging market economies and assets, which could dissuade investors.
What Biden means for Multinationals:
It is no big secret that multinational US-based companies, specifically tech companies, have benefitted from the Trump administration. Biden’s presidency will have an unpredictable effect on multinational companies even though he gained large support from Silicon Valley. Biden has expressed tax plans that will raise reverse some of Trump’s tax policies including raising that corporate tax rate back up to 28%, which changes the venture capital business model as long-term capital gains taxes have now changed for those who earn more than $1 million per year. This will prompt less domestic and international investments as venture capital will be less attractive. Biden has always been wary of multinational big tech, and there may be more restrictions on the rise of how they interact within domestic and global markets.