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2024 US Elections – a tipping point for Europe?
November 4, 2024
This American election is like no other, it has captured the minds of European politicians and business leaders, while offering gripping political theatre. Multiple assassination attempts and a dramatic change in candidate have created an unprecedented race which may reshape the boundaries of tax and trade in Europe.
Ground Rules
Trump v Harris is likely to be the most remarkable election for a generation, and if polling averages are to be believed, it will likely be the closest since Bush v Gore in 2000. The key number is 270, the number of Electoral College (EC) votes required to win the Presidency. For all intents and purposes, the popular vote should be ignored, for example, there is the case of 2016 where Hillary Clinton won 48.5% of the popular vote compared to Trump’s 46.4% and still lost the EC by 306 to 232.
In reality, only seven states truly matter in this race: Pennsylvania, Michigan, North Carolina, Wisconsin, Georgia, Arizona and Nevada. The rest are far outside the margin of error in favour of one party or the other. Pennsylvania, with its 19 EC votes, is commonly seen as the ‘hinge state’.
The most ‘straightforward’ and realistic path to 270 for the Democrats likely necessitates winning Wisconsin, Michigan and Pennsylvania, alongside Nebraska’s 2nd Congressional District. Harris will also by default be seeking to expand a victory to Nevada, Arizona, Georgia and North Carolina.
The Trump campaign will be hoping their most straightforward path to the White House runs through Pennsylvania, Georgia and North Carolina, bringing them to precisely 270 EC votes, with potential to expand the map in Arizona, Michigan, Nevada and Wisconsin.
Europe and trade
For Europe, foreign policy and trade are the key concerns of divergence when considering the outcomes of November 5th, given the vastly differing visions for the world set forth by both candidates.
European voters broadly favour a Harris Administration. Trump has concerned Brussels, the UK and most EU capitals with his stance on Ukraine and has put into question America’s commitment to its ally should he win back the White House.
Small EU states like Ireland are uniquely vulnerable to Trump’s proposed trade and tax policies, with the Republican candidate having proposed a 15% Federal corporate tax rate earlier in the year.
Furthermore, Trump’s proposed trade tariffs, if even partially enacted, would also reshape the world economy. The former President has suggested a 60% tariff on Chinese goods, while suggesting a tax of 10% to 20% on all imports.
It is worth noting that it is the American consumer that would bear the brunt of these tariffs given that it is the importer that pays them and then passes on the cost to the final purchaser. Equally, the European Union would impose retaliatory and likely escalatory tariffs on American products.
A fork in the road
Of course, Trump has been President before, and tariffs were imposed on European steel and aluminium, which were suspended under the Biden Administration.
It is likely that Trump will have more freedom to enact his Executive Branch level agenda if he wins, given his centrality as the key power broker in the modern Republican party and the abundance of increasingly loyal Congressional politicians in the legislative branch. His 2017-2021 cabinet often impeded the perceived excess of some of his proposed policies due to a then ongoing power struggle between the old establishment wing of the party and the new MAGA movement.
On balance, Harris may represent a certain orthodoxy, but America’s current version of trade orthodoxy is a sharp departure from the Reagan, Bush, Clinton and Obama years. The Biden Administration has in part championed protectionism and America First, refusing to undo much of Trump’s trade policies, and that is certainly where the bipartisan consensus rests in Washington.
Harris is far more likely to rely on domestic tax incentives for American producers rather than tariffs, as seen in the Inflation Reduction Act and the CHIPS and Science Act. Harris is also more likely to build or redesign multilateral trade agreements in a manner which would better serve America’s interests, from a Democratic Party perspective, rather than deploying unilateral tariffs.
Crucially, calls for strategic autonomy have sharply increased since 2016 in Europe in policy areas ranging from defence, foreign policy and trade, to critical raw materials.
The bottom line
Who wins Pennsylvania will likely either sharply change Europe’s medium-term course or ensure an extension of the current status quo, but if Harris wins, it may be a stall rather than a cure to the emerging trends of isolationism in the global economy. For Europe as a whole, Harris represents a broadly comfortable, if not slightly uneasy, status quo, while a Trump victory will represent anxious uncertainty to many business leaders.
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A version of this blog first appeared on FINN Partners Ireland.
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