10 Nov 2020
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Victory for Joe Biden in Pennsylvania on Saturday brought his electoral college vote total past the magic 270 level, prompting all the major media outlets in the US to confirm Joe Biden as President-elect. It will come as no surprise that Trump hasn’t conceded to defeat quite yet and is planning legal challenges by contesting the results and claiming fraud over the legitimacy of postal ballots. The rules vary from State to State but some have already agreed to a recount.
Trump’s view doesn’t seem to be shared by all though; some of his campaigners and supporters have accepted defeat and world leaders have begun to endorse Biden. Boris Johnson has stated the UK’s intention to collaborate with Biden and Angela Merkel is looking to maintain the strong relationship Germany has with the US. Putin, a big supporter of Donald Trump, hasn’t yet made comment other than stating that the correct thing to do is to wait for the official results…
What happens next? The process is lengthy with the inauguration not due to take place until January 2021 when Joe Biden will be sworn in as the official President of the United States. What are the implications of a Biden win? Part of the process is the election of the Senate and the House of Representatives, not unlike the House of Lords and Commons in the UK. The difficulty that Biden may have in pushing through legislation is that it isn’t a clean sweep. If the opposing party holds one of the houses, it may prove tricky to push through a reform as the opposition generally won’t concede, potentially meaning a divided Congress and a continuation of the gridlock which has previously prevented fiscal packages from passing.
Biden seems likely to prioritise additional major fiscal stimulus to help the economy continue to recover from the steep downturn caused by the coronavirus pandemic but he’s also a supporter of increasing corporate tax to fund some of this additional spending. Companies were previously taxed at 35% but at the start of Trump’s presidency, this was significantly reduced to 21%. Biden is looking to take this back up to 28% and there are concerns that profitability will be an issue at a time when businesses are already struggling from the fallout of the coronavirus pandemic, but Biden’s pledge to support companies may go some way to counteracting this effect.
Biden has also committed to be greener and wants to stimulate the economy by supporting companies that use clean energy technology and run energy efficient factories. He is also looking to decrease spending on defence, allocating funds that are currently assigned to the army over to the green initiative. Countries in NATO should spend 2% of their annual budget on defence, but some European countries haven’t achieved these levels of spending in recent years. The new strategy proposed by Biden would bring the US in line with Europe, putting less pressure on European countries and allowing bonds to be formed more easily. It’s safe to say that there is a collective sigh of relief in the EU that the Trump era is coming gradually to a close. His administration wasn't exactly a fan of the bloc.
All signs point to Biden taking a tough stance on China in terms of market practices and human rights issues, though he will likely seek multilateral partnerships and engage levers beyond trade in any renegotiation of the US/China relationship. Production of imported goods may shift to alternative countries, which could be an opening for other economies.
Expanding access to health insurance also appears to be a priority. Biden is looking to create a new Medicare administrative public option, automatically enrolling low income Americans who aren’t currently eligible for Medicaid, providing them with a form of insurance. As a result, customers may be siphoned away from private health insurance providers, which could have a negative impact on pharmaceutical stocks.
Biden believes that the lack of legislation was a key contributor to the Global Financial Crisis and his administration may seek to impose stricter rules and enforcement policies for banks. These measures could include additional limits on bank dividends and share buybacks as the U.S. recovers from the pandemic and its fallout.
And the burning question, what does Joe Biden’s win mean for Brexit Britain? The US values its relationship with the UK in terms of security and geopolitics. Boris Johnson told broadcasters that he and the US President-elect shared a belief in democracy, human rights, free speech and free trade. Biden seems keen to nurture the relationship and his election could be a catalyst for a stronger and more productive partnership between the US and the UK. It’s all to play for…
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