US elections: Get ready for the Showdown

President Joe Biden as well as the democratic candidate Kamala Harris, are backing a climate policy focused on renewable energies and supporting the IRA (Inflation Reduction Act). The expansion of renewable energy with appropriate regulations and financial subsidies is prioritized.

Presidential candidate Donald Trump is quite different. His campaign tends to focus on traditional energy generation using oil, nuclear power, and non-renewable sources. His aim is to reverse the regulation of the energy sector, as he believes that the country’s energy requirements cannot be met by alternative energy sources in the medium term. As a result, energy as a central resource would remain more dependent on the price fluctuations of fossil fuels, which will become scarcer in the long term. Investments in alternative energy sources would only pay for themselves much later through falling energy costs.

The Republicans are known for cutting taxes, slashing subsidies, and abolishing large numbers of regulations during their term in office. This could simplify matters for banks and telecommunications companies. On the other hand, deregulation and tax cuts boost consumption and generally have an inflationary effect – which in turn could put sectors with a high level of debt financing at a disadvantage in the short term because rising interest rates make refinancing more expensive. Whether rising turnover can compensate for this remains to be seen on a case-by-case basis.

The democrats, on the other hand, want to keep the US budget deficit in check. That is why they are in favor of higher taxation on wealthy individuals and companies. These efforts would tend to have a deflationary effect.

The two presidential candidates also hold opposing positions on foreign policy. Donald Trump is in favor of the US withdrawing from conflicts abroad. Kamala Harris, on the other hand, wants to stick to the current joint policy with foreign allies and form a counterweight to foreign aggressors.

Both the Republicans and the Democrats have recognized over the years that an anti-China policy wins points with voters.³ Nevertheless, the two parties are pursuing different approaches in their dialog with the world’s second-largest economy. While the Democrats are pursuing a collaborative strategy, the Republicans are more of a “hardliner”. The Republicans therefore tend to focus on promoting the local economy, increasing import duties, and putting Chinese companies on the “Entity List”.⁴ This form of protectionism is ultimately paid for by consumers, whose goods become more expensive as long as they cannot be replaced by locally produced alternatives.

³ https://www.pewresearch.org/global/2024/05/01/americans-remain-critical-of-china/

⁴ The “Entity List” is a list maintained by the US government of foreign persons, companies and organizations that are classified as national security risks and that are subject to export restrictions and licensing requirements for the export of certain technologies and goods.