By Zander Kuebler, Member of the ESSEC Club of Economics (ECE)
With eight months to go before the 2024 United States Presidential Election, global markets are on tenterhooks, closely observing the unfolding political landscape. As an anchor of the global economy, the United States (US) wields considerable influence over international economic trends, trade policies, and investment flows. This election is, therefore, not only a domestic affair but a global event with far-reaching implications for economic stability, trade dynamics, and geopolitics.
Elections Matter, 2024 More Than Most
Boasting a Gross Domestic Product (GDP) exceeding USD 25 trillion, the US economy represents nearly a quarter of the global economy, according to the World Bank. This economic heft gives US policy decisions a ripple effect across the world’s financial markets, a fact not lost on traders and governments: JPMorgan reports 28% of global institutional traders citing “election year volatility” as their top fear for 2024.
But this November’s showdown is expected to shake global markets even more than a typical US presidential election year. The US election headlines 2024 as the biggest election year ever, with a variety of impactful nations voting on highly contested and impactful affairs. Because of the US’s economic positioning, the already volatile markets will be quaking in anticipation of the certainty that November brings, with trade policy and environmental commitment as the two issues on the docket that stand at the most impactful global tipping points.
To Trade or Not to Trade
Historically, the US’s stance on trade agreements and tariffs has the power to foster or hinder international trade. In 2018, the Trump administration’s “trade war” tariffs against imports from China affected over USD 360 billion worth of goods, disrupting global supply chains and causing an immediate 0.3% dip in global GDP, per the International Monetary Fund (IMF). Trump has doubled down on these tariffs, with promises to raise them if given a second term. Surprisingly, the Biden administration has done little to combat these existing tariffs this term. Still, they have amped up criticism of the Trump trade policy following Biden’s 2024 State of the Union address, promising a wildly different approach in a prospective term two.
Trade partners of China and the United States stand to gain or lose significantly based on this election and its subsequent impact on trade restrictions. For example, the 2018 increase in US restrictions on Chinese imports allowed Mexico’s share of exports to the US to climb, ultimately surpassing China as the US’s top import source this year. Conversely, Europe struggled to benefit from the US’s China aversion, primarily because many European companies still depend on China for their supply chains. While most European companies are now “de-risking” by decreasing China investments, the existing reliance on China from a manufacturing and supply standpoint would still hinder Europe’s ability to fulfill the US’s import needs and, consequently, Europe’s ability to capitalize on the policy shift.
The Environment for Environment
A similarly impactful point of contention is the US’s leadership role in climate leadership. The American re-entry into the Paris Agreement under the Biden administration marked a significant shift towards prioritizing climate change on the global stage. This move, along with the controversial tax-credit-gifting Inflation Reduction Act, has catalyzed global investments in renewable energy. Because the US is so large and wealthy, manufacturers worldwide salivate at the prospect of tapping into the American market, with global renewable investing growing nearly 50% across all categories since these climate spending policies were passed in 2021.
The Trump administration’s hesitance toward some of these more extreme climate spending measures comes from a geoeconomic lens. One area of concern, for instance, is the rapid adoption of electric vehicles (EVs), where many Western nations, including the US, have delayed pro-EV policies out of fears of China’s control of the essential components of EVs. Trump has already endorsed a reversal and “then some” of Biden’s climate policies but has not yet addressed whether he would again attempt to leave the Paris Agreement.
With both candidates staunchly set in their opposing viewpoints on where the US belongs in the climate debate, America’s choice in November is bound to echo among international energy markets and green technology investments for at least the next four years.
All We Can Do Is Wait
The 2024 US Presidential Election will be a pivotal moment with significant implications for global markets. The direction of US trade and environmental, fiscal, and foreign policies will shape global economic landscapes, affecting everything from market volatility to international trade dynamics and ecological investments. As the world watches, the decisions made by US voters will resonate far beyond American borders, highlighting the global stakes of national elections in an interconnected world.
Zander Kuebler
Zander is a Washington D.C. native pursuing a GBBA at ESSEC Business School in Paris and Singapore, with an exchange at UCL in London. He is passionate about bridging the gap between policy and finance and has held a variety of academic and professional roles in both fields. Thoughts on the article? Please reach out!