Viewed from afar, it is tempting to boil the US Presidential election down to two key characteristics of the candidates. Kamala Harris – on the face of it – largely carries on the work of the current Biden administration and is, in that sense, more of a ‘known quantity’. On the other hand, Donald Trump appears to be much less of a known quantity, but there are questions about how much would really change in a ‘Trump 2.0’ administration.
Go deeper with GlobalData
For automotive companies, there are questions to consider in terms of both the overall policy mix in relation to the broader US economy and the specifics of a future administration’s industrial policy.
A new report by the analysts at GlobalData has considered the two Presidential campaigns, what has been said by the candidates and also likely outcomes.
Do not forget about Congress
The report reminds us that alongside the Presidential elections, the House of Representatives and one-third of the Senate (which together comprise Congress) will also be up for election. Therefore, the degree to which the victorious presidential candidate can fulfil their campaign promises will depend on the makeup of Congress. GlobalData says it expect to see a split Congress, but if one party does end up with majority control of Congress this is more likely to be the Republicans than the Democrats.
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By GlobalDataUnited States (US) Elections 2024 – Executive Briefing – Strategic Intelligence
US economy ‘mostly unaffected’ by election outcome
The report says the US economy is more resilient than people believe and will likely be mostly unaffected by the outcome of the presidential election (barring a contested election that is not quickly resolved). The economy, it says, will be most impacted by a united government (meaning one party wins the majority in the House, Senate, and White House). A united government increases risks and opportunities for business due to faster and more coordinated legislative and executive action.
However, the report also concludes that ‘Trump 2.0’ will focus on tax cuts and tough protectionist policies affecting the economy, climate, social security, border security, and foreign affairs. A divided government will see Trump focus on what he can control (eg, agency regulations, tariffs, and global affairs) over what he cannot (eg, budgetary spending), while a Republican-majority Congress will support Trump’s more radical protectionist and climate-sceptic policies.
Harris to ‘follow Biden’ on policy
Despite her more centrist positioning in the campaign, Harris, the report says, is likely to follow Biden on policy. Harris has touted an economic plan for small businesses, highlighted her gun ownership status, and reversed her opposition to fracking. When in the Oval Office, Harris will likely oversee the implementation of the multi-year investment projects passed during the Biden-Harris Administration. New legislation is likely to be heavily roadblocked by a Republican-majority Senate.
Biden’s economic policy focused on promoting the reshoring of manufacturing, increasing public investment, and lowering unemployment rates. Harris is likely to follow Biden’s footsteps and complement the three legislative acts of Biden’s first term with a second package, if possible (eg, CHIPS 2.0), alongside complementary legislation (e.g., changes to federal permitting), to facilitate implementation. To build advanced manufacturing capabilities in the US, changes to visa pathways will be necessary to bring in skilled workers. Upskilling projects have been suggested but will be insufficient in filling skills gaps in the tech sector. However, implementing these projects will be tough in the event of a Republican-majority Congress.
Harris supports Biden’s proposal to raise the corporate rate tax from 21% to 28%. As a presidential candidate in 2019, she even supported a more aggressive hike to 35%. Harris has also proposed eliminating tax cuts for households earning more than $400,000 per year and restoring the child tax credit to give families with newborn children a $6,000 tax cut.
As far as a Trump 2.0 administration goes, GlobalData’s report notes that Trump’s policies tend to be less extreme than his campaign rhetoric. They also change regularly. His views on tax cuts, government expenditure, and abortion rights have changed over time and may change again. Economic policy would likely focus on tax cuts for individuals and a dilution in fiscal regulation. The Republican party will likely look to extend the 2017 Trump tax cuts for individuals expiring in 2025. Trump has also proposed cutting the corporate tax rate to 15% from 21%, although he has wavered on that commitment given the growing US fiscal deficit. There will be some shifts in spending priorities, most notably from social security to border security. However, GlobalData says there will be no fundamental changes to the US budget. There will likely be a stronger fiscal stimulus and more aggressive fiscal policy if Trump is elected alongside a Republican-majority Congress.
The report also says Trump will not roll back Biden-era investment initiatives, such as the Inflation Reduction Act (IRA) and the CHIPS and Science Act but will limit resources allocated to their implementation and oversight. Trump will also prioritise reshoring over nearshoring and push to impose a 10-20% global tariff on all imported goods. Some US-allied countries will circumvent these tariffs through new free trade agreements.
United States (US) Elections 2024 – Executive Briefing – Strategic Intelligence
GlobalData’s analysis of the policy landscape for the two candidates suggests that, despite the polarisation of US politics, Harris and Trump have core policies in common, even if they have espoused different priorities on the campaign trail. In terms of their distinct priorities, how much eventually makes its way through the Washington machinery of process and lawmakers is obviously a big question.
SECTOR ANALYSIS – Automotive
The GlobalData report says the US election has historically not had material near-term automotive market impacts. However, it also says the continued US-China trade war is the biggest impact factor to the US automotive market.
Both candidates are likely to increase protectionism, but with heightened tariff risk under Trump. Biden’s tariffs on China EVs, batteries, and semiconductors are expected to remain.
The report also says Biden’s proposed ban on vehicles with Chinese or Russian hardware and software likely holds regardless of who wins and is expected to be adopted by Canada. Trump is also open to Chinese plants in the US, which may spark a new strategy pending hardware/software ban specifics.
Stronger tariffs are likely to trigger retaliations and a potential early review of USMCA if a Trump administration pushes a 100% tariff on imports from Mexico.
Electric vehicles are an area where the two candidates’ policies potentially diverge in the context of slower EV sales growth in the US – as consumers struggle with EV pricing and infrastructure.
Trump may end IRA’s EV credits for consumers and specifically section 45W impacting leasing incentives could be at risk. Mid-term support of ICE would increase under Trump, further delaying BEV programs.
Harris is likely to further Biden’s EV push and add more investment toward infrastructure, specifically the charging network. That might be relatively good news for EV start-ups such as Lucid and Rivian.
However, both would push for domestic manufacturing of EVs and components, with a focus on battery and semiconductor production in the US.
On regulations, existing targets are difficult for OEMs to meet given consumer interests. Biden backed off tougher NHTSA requirements in June 2024 already.
Current EPA, NHTSA, and IRA requirements would be under great pressure with Trump.
Trump may task Elon Musk with eliminating government waste, which likely would further trim regulations impacting Auto.
Harris is likely to keep and expand the regulatory environment in Auto, but there is no indication yet if the policy would increase regulatory pressure beyond the current Biden stance.
United States (US) Elections 2024 – Executive Briefing – Strategic Intelligence
