The 2020 US election outlook: Part 3 – the geopolitical implications

September 16 2020

John BriggsHead of Strategy, Americas

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Brian DaingerfieldHead of G10 FX Strategy, Americas

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Donald Trump and Joe Biden have for the most part widely differing outlooks when it comes to international relations, so who wins the election is going to have major implications in the geopolitical realm. In this article we take a look at what might happen.

The US may have been withdrawing from the international stage somewhat over the past four years of the Trump presidency, but when America votes, the world still takes note. That’s because the US remains the world’s biggest economy and retains enormous clout.

Who wins the election has big implications – if Donald Trump wins, will his America First policy mantra isolate the US? If Biden wins, will the US return to the front of the international stage as a champion of multilateralism? What are the implications of who wins the Presidency on some of the world’s major countries and regions? Let’s take a look.

A second term for President Trump? Expect more of the same

President Trump’s America First mantra has been a hallmark of his geopolitical strategy during his first term in office, and he has shown a strong preference for unilateralism. He has made no secret of his disdain for multilateral agreements, including NAFTA, the Trans Pacific Partnership and the Iran nuclear deal. The President also has strong views on multilateral institutions – most recently, he ended US funding for the World Health Organization.

If Trump wins the election this year we’d expect a continuation of his unilateral transactional style of diplomacy. In fact, we think he would move even further into an “America First” geopolitical strategy, which may result in further strain in relations between the US and other countries.

We expect President Trump would continue to use tariffs (or the threat of tariffs) as a tool of foreign policy, not just economic policy. What may result is a continuation of a “maximum pressure” strategy that implies harsher stances on international trade, including against China and Europe.

A return to multilateralism with President Biden… kind of

Joe Biden offers a different path – a move towards, but probably not a complete return to, Obama-era multilateralism. Biden believes strong alliances between global democratic institutions are needed for American security and prosperity. This could be particularly beneficial for the EU, as Biden is likely to abandon tariff threats on the EU.

But Biden is not exactly calling for a push towards a free-trade utopia – his “Made in America” economic vision includes tougher rules for government procurement that favour US-made products, while his trade policy stance toward China could be mistaken for Trump’s own plan.

President Trump’s policy objectives with regard to the US-China relationship have long been murky, and it’s clear that the politics of the day have left the President eager to lean into a negative tone. But a Trump victory would give him a mandate from voters to stay tough on China. Scepticism about the benefits of foreign trade imply that a second-term President Trump may once again use tariffs, and the threat of tariffs, as a tool to pressure China on a variety of issues.

Biden’s push towards multilateralism does not imply a relaxation of the US stance against China – instead, he would look to leverage an alliance of democratic states to add pressure on China. The Biden campaign has stressed that unilateral negotiations with China would be less effective than a globally coordinated effort.

Biden’s past criticism of Trump’s tariffs on Chinese goods suggests that he would be open to removing the tariffs put in place under the Trump administration. But his desire to link economic activity with climate targets could open up a new front when it comes to economic tension between the US and China.

The result of the election has significant implications for US-EU relations. On the international trade side, President Trump has been highly critical of EU trade policies, at one point calling the EU “worse than China”. Biden’s overarching goal of restoring American partnership with its democratic allies implies a shift toward a more cooperative relationship with the EU and NATO.

Auto tariffs are a high profile area of difference. We think that a Biden administration would take the threat of tariffs off the table, while Trump would ensure the threat continues to overhang US-EU relations. That said, we remain sceptical that President Trump would actually impose auto tariffs if he wins a second term.

Implications for global taxation of digital services will be a key difference. The Trump administration has pressured European countries against imposing digital services taxes, which it sees as prejudiced against US tech giants. But a Biden administration may be more open to global coordination on digital services taxes.

With the end of the UK-EU transition period approaching fast, a free trade agreement (FTA) between the UK and the US is extremely unlikely to be completed, let alone enacted, before the US election in November. That means the result of the Presidential election is critical for the post-Brexit US-UK trading relationship. 

Under a Biden presidency, UK and US negotiations may need to effectively restart with the US under new management, though both the Biden campaign and the UK government have expressed interest in rejoining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (also known as CPTPP, or simply TPP). But there is a risk of delay, given the Obama-Biden administration warned the UK that it would fall to the “back of the queue” if it voted for Brexit.

Either way, the need for Congressional approval of an agreement is likely to hang over the prospect of a full FTA, even if President Trump wins in November and a deal comes quicker than expected. Unless Republicans take back the House of Representatives, full approval of a UK-US FTA would probably undergo significant scrutiny by the Democratically-controlled House of Representatives.

President Trump has stressed that he and his administration have been tough on Russia, pointing to increases in US military spending and high-level sanctions against Russian officials and companies. But Trump’s personal relationship with Russia’s President Putin, his desire to have Russia reintroduced into the G8 and his denial of Russia’s reported interference in US elections have muddied the water in regard to his relationship with Russia.

Under a Biden Presidency, we would expect the US relationship with Russia to become more hawkish and more consistent. That may imply new election interference related sanctions on Russia. But we think a Biden presidency may lean towards a more orthodox and measured approach in maintaining the continued functioning of the global financial system. 

President Trump’s stance on immigration has been a consistent hallmark of his first term, and no country has borne the impact of that stance more than Mexico. However, the completion (and implementation) of the renegotiated NAFTA pact has improved relations between the two countries.

US-Mexican relations are perhaps not as significant a risk heading into the 2020 election as they were in 2016. The United States-Mexico-Canada Agreement reduces (but does not eliminate) the risk of President Trump threatening Mexico with new punitive action during his second term, while a Biden victory would alleviate the risk of sudden US escalation over immigration. Canada and Mexico would both benefit under a Biden administration push towards a more multilateral approach to diplomacy.

We think the biggest risk for Latin America from the Biden campaign comes from his aggressive climate initiatives, which in particular could manifest themselves in the form of tensions between the US and Brazil. Biden has been critical of the deforestation taking place in the Amazon rainforest under President Bolsonaro.

US Election watch

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