U.S. 2024 presidential election: The potential global impact

A tight race

Before the summer we reviewed the upcoming presidential election and its likely impact on the U.S. economy¹ . At that time, President Joe Biden had just bowed out of the race and Vice President Kamala Harris had taken up the mantle. Former President Donald Trump led Harris by a modest amount in overall polling approvals, though by less than he had led Biden. Since then, Harris has seen an improvement in ratings. Rising from a deficit of 1.7 points, she now leads Trump by 1.1pts²

Exhibit 1 illustrates this improvement in polling for the Democrats has spilled to marginal states, with Harris now leading in most marginals and almost neck-and-neck with her Republican rival in five others – only Florida remains staunchly pro-Trump. Exhibit 2 shows that based on this polling, the electoral college vote is now delicately poised – contrary to the position in July. Allan Lichtman, the U.S. historian who has correctly predicted each election since 1984, recently announced³  his prediction for a Harris win.

Yet Exhibit 3 suggests the election is far from decided. Eight years ago, Hillary Clinton enjoyed far larger leads over Trump at this stage but went on to lose. Harris’ convincing performance in September’s televised debate is likely to help arrest the tentative softening in her lead after the initial honeymoon and post-Democrat Convention support. We will continue to watch the polls for a clearer steer on November’s outcome.

In this paper we consider the impact the U.S. election could have globally. We believe a Harris win could have a material impact on the outlook for domestic activity – particularly distributionally – albeit our expectation remains she would face a split Congress, which would hamstring bolder policy. Her victory’s impact on the world would thus likely be limited to the not inconsequential spillover effects from U.S. growth.

Yet a win for Trump would have more direct impacts for many economies and could start a chain of events that could lead to many indirect effects. In particular, we consider the impact of Trump’s proposed tariff policy. While we have explained that in price terms this is something we would expect to be felt more by U.S. consumers than foreign producers, in volume terms this is likely to have a material impact on China – the focus of Trump’s campaign ire – with a proposed 60% tariff. By contrast, while the Eurozone would face a plausibly smaller 10% tariff – from the roughly 5% weighted tariff currently – trade tensions could rise further in the face of any EU retaliation or from the EU’s separate efforts to address carbon emissions through its Carbon Border Adjustment Mechanism.

These policies are likely to drive U.S. interest rates and the dollar higher – despite Trump’s protestations to the contrary. This would impact the global economy, particularly emerging markets.

We also consider the implications of Trump’s statements on security. His antipathy to NATO and suggestion of a settlement in Ukraine could signal a period of security withdrawal from Europe. In the face of persistent Russian aggression, Europe could have to revert defence spending to levels that prevailed before the post-Soviet Union ‘peace dividend’ – which is something few European economies are well placed to fund. In Asia, Trump has also threatened less security provision, or a more transactional relationship. This could also see a reduction in U.S. security presence here, with implications for many nations in Southeast Asia.

More broadly, we examine Trump’s likely environmental stand. Reneging on the Paris Agreement in his first term, we expect Trump to weaken climate change avoidance policies. While we have argued that Trump is unlikely to reverse Biden’s signature spending bills⁴  completely, he is likely to oversee deregulation of oil and gas production, boosting output for both. In the short-term this is likely to lower energy costs, softening inflation outlooks globally. However, over the medium to long-term this is likely to keep U.S. greenhouse gas emissions high.

We consider the possible impact on China and Europe, before broadening our outlook to consider Emerging Asia, Japan, Mexico, Canada, and Emerging Europe, as well as briefly reviewing the impact for other economies.