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Hello from Washington DC, where we have experienced another turbulent, close and generally poll-defying presidential election. The final results are not in yet in a few swing states, but it looks like Joe Biden may be heading for a narrow victory over Donald Trump.
There is uncertainty over legal challenges to the results, after the president’s vow to contest the outcome if it points to his defeat, which could lead to tension and uncertainty in the coming weeks. So we’re all fastening our seat belts in DC for a very difficult and uneasy time.
It’s clear that Mr Biden did not secure the resounding victory he was hoping for, with Congress likely to remain split between Democratic control of the House and Republican control of the Senate. But if he wins the White House, that will be the big prize, and Mr Trump will no longer be holding the reins of power — including on trade.
In our main piece, we take a look at what the results so far tell us about the politics of trade in the US. Tall tales of trade examines a looming deadline for US trade policy, while our chart of the day looks at the EU’s path to recovery from the economic effects of Covid-19.
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Joe Biden would bring more stability to US trade policy
Robert Lighthizer, the US trade chief who managed Donald Trump’s tariff battles over the past four years, will probably draw some comfort from the election results in his home town. Mr Trump won Ashtabula county, in north-east Ohio in the heart of the rustbelt, with more than 60 per cent of the votes against Joe Biden, improving on his 2016 performance against Hillary Clinton.
But is that enough to claim an electoral vindication for the president’s hard-nosed trade policies? Arguably not. Circling back to 2016, Mr Trump won the White House by prevailing in Pennsylvania, Michigan and Wisconsin, by extremely tight margins, on a vow to rebalance trade relations with the rest of the world so that the fortunes of non-college educated, blue-collar workers displaced by globalisation would be revived.
The evidence from the election results is that many of those voters stuck with the president, as in Ashtabula, making those states much closer than pollsters were expecting for an incumbent in an economy devastated by a pandemic and a recession.
But Mr Trump’s political goal, surely, was far more ambitious than that: he would have liked to have built on his 2016 rustbelt victories thanks to his trade record, which included the renegotiating of Nafta and the confrontation with China.
On that count, Mr Trump may well have fallen short, with Wisconsin and Michigan tilting towards Mr Biden and a close race in Pennsylvania — which could cost Mr Trump the presidency if the results are not successfully challenged. Whereas the president generally did well in the more economically dynamic, more diverse sunbelt, his relative weakness in the rustbelt signals that protectionist policies weren’t a political panacea for him. In fact, some voters may have judged that they didn’t live up to their hopes.
Looking at the results a different way, however, it’s clear that Mr Trump didn’t pay a huge price for the trade wars either. His support in farm states remained high — he prevailed in Iowa again and consolidated his gains in many rural counties across America that had suffered as his tariffs fuelled retaliation that closed off markets to agricultural goods and created huge disruption. Mr Trump tried to compensate for that by bailing out many farms with federal dollars, which may have been just enough to keep them on his side.
It’s also worth noting that the bulk of Mr Trump’s trade battles occurred in 2018 and 2019, before the pandemic hit — and he noticeably ratcheted down the tensions this year — which might have also helped him reduce the domestic fallout.
Which brings us to what might happen in 2021. If Mr Trump ekes out a surprising victory, he is unlikely to change his approach to trade very much based on these results. In fact, in a second term he might feel emboldened to reignite some of the unfinished commercial conflicts he launched during the first one.
Mr Biden, on the other hand, will bring more stability and less erratic leadership to US trade policy. But he is also unlikely to veer from the course he charted during the campaign, which involves prioritising domestic investment over trade liberalisation and tightening “buy America” rules that force the federal government to buy from US suppliers at the expense of foreign competitors.
And if he wins thanks to a thin margin in the rustbelt, Mr Biden will not be able to afford much deviation from those maxims.
Tall tales of trade
President Trump signs the US-Mexico-Canada Agreement at the White House in January © Bloomberg
The most notable deadline on trade policy facing both a potential Biden administration — or a second Trump administration — is in the middle of next year, when a law called Trade Promotion Authority expires in Congress.
This legislation allows for trade deals negotiated by the executive branch to be considered rapidly and without amendments on Capitol Hill, strengthening the hand of American negotiators since it offers US trading partners more certainty of a successful conclusion.
But TPA is no substitute for broad political consensus. The renegotiation of Nafta as the USMCA — the trade pact between the US, Mexico and Canada — was passed in Congress without following the TPA rules because there was widespread bipartisan support. Even if the statute is followed, trade deals can be upended and renegotiated if they lack enough votes to be approved. The UK’s goal is to get its trade agreement with the US done and dusted before next summer’s TPA deadline.
Charted waters
The EU’s path to recovery from the economic effects of Covid-19 has been set back by the pandemic’s second wave and it will take at least two years for the bloc’s economy to return to pre-pandemic levels, Brussels has warned. The recovery from the EU’s deepest downturn in history will be slower than previously expected, according to forecasts published by the European Commission on Thursday, as the resurgence in the virus has forced most member states to impose fresh restrictions on activity in recent weeks.
Don’t miss
Shares in big US tech groups led Wall Street sharply higher and the dollar weakened as results of the election released so far reshaped investors’ outlook for the path of the American economy and interest rates. The Nasdaq Composite gained 2.4 per cent in early trading, the S&P 500 climbed 1.9 cent while long-term Treasury prices advanced. Shares in Facebook, which rose more than 8 per cent on Wednesday, added another 3.5 per cent.
Read moreJack Ma, founder of Alibaba, is fond of dreaming big. As his company prepared for the 2004 launch of Alipay — which was then a clunky online payments service for ecommerce — he told colleagues that “someday it has the possibility to become China’s largest bank”, according to Porter Erisman, author of the 2015 book Alibaba’s World. This week, that dream was almost realised — until Beijing decided otherwise.
Read moreBMW’s third-quarter profits rose almost 10 per cent as pent-up demand, primarily in Asia, helped the German brand post the best sales figures in its history. Sales in China, BMW’s largest and most profitable market, surged more than 31 per cent in the quarter to the end of September compared with the same period in 2019.
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Tokyo talk
The best trade stories from Nikkei Asia
Apple is asking suppliers to produce 2.5m MacBook laptops powered by its in-house designed CPU by early 2021 to cut reliance on Intel chips.
Read moreSingapore and Hong Kong are the next target markets for a brokerage that helps wealthy investors buy bottles and casks of rare whiskey as an alternative asset class.
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Source: Economy - ft.com
