In a context of intense political polarization and where polls predict a very tight margin of difference, the Democratic and Republican candidates for the White House, Kamala Harris and Donald Trump, offer voters apparently antagonistic recipes to boost an economy that remains strong despite global uncertaintywith a labor market functioning at full capacity and a Federal Reserve focused on achieving a soft landing that allows inflation to be controlled without damaging activity.
The applicants, who have put very different measures on the table in areas such as tax, housing, minimum wage or energy, try to empathize with a voter gripped by the increase in the cost of living in recent years. However, Harris and Trump offer a rather continuous response to solve the problem of public debt and deficit, a true ‘hot potato’ for the world’s leading economy, as well as in relation to trade, where protectionism will continue to prevail. especially if they keep their promises.
The latter will have an obvious impact for the European Union. The Twenty-seven are in an increasingly complicated situation as a result of the open trade war with the two largest powers on the planet, the United States and China. His competitiveness gap with both has not stopped growing in recent years and it does not seem likely that these tensions will dissipate after January 20, the date of the inauguration of the next American president.
Both Harris and Trump are proposing policies that could have a significant global impact. The Republican is committed to aggressive protectionism focused on tariffs, while the Democrat has put on the table a more moderate strategy but equally focused on protecting the national economy. “Both programs present risks to the fiscal stability of the United States and “could influence international trade relations, especially with China and Europe”warn Judith Arnal and Federico Steinberg, researchers at the Elcano Royal Institute in a recently published report.
The macro shines… while the ‘micro’ scratches its pocket
The key at the polls may be in the difference between the macro and the micro. The macro offers a very optimistic outlook, with GDP that continued to grow at 2.8% annualized in the third quarter despite the Fed’s delay in lowering interest rates, and inflation that moderated to 2.4% in September and an unemployment rate of 4.1%.
At street level the perspective is somewhat different, since citizens have been facing a sharp rise in mortgages, healthcare, daycare and dependency expenseswhich has generated notable discomfort and criticism of Biden’s management. Added to this is the rise in oil prices due to war in the middle eastwhich could bring new increases in the price of gasoline, a key indicator for Americans.
In this framework, Trump is betting on a more aggressive trade policy with generalized tariffs that They would be at least 60% for China, 20% for the rest of the world and 100% for countries that refuse to trade with the dollar. In the case of Kamala Harris, these would be limited only to those economies considered enemies, such as China itself, Russia, Iran and North Korea. The Democrat would also be in favor of applying discriminatory subsidies to promote green investments.
Aggressive tax cuts in the face of greater social spending
Precisely, in fiscal matters, Trump has opted for generalized tax cuts that include a reduction of corporate taxation to 15% and for exempting tips, overtime and Social Security benefits from taxation. Its objective is also to maintain the discounts it approved in 2017 and which expire next year.
These are fiscal measures that the New York leader carried out during his first term and that favored the highest incomes, families with children and large assets. Harris would limit these reductions to families with incomes of less than 400,000 euros, which in practice means a tax increase on the highest incomes. Analysts warn that any economic benefits from tax cuts could easily be offset by the negative effects of tariffs which, among other things, would discourage business investment.
The current vice president is committed to increasing public spending on subsidies for housing, health and child care. Harris has thus committed to increase the minimum wage or to set paid family and medical leave. Plans that, in principle, would have a less negative impact on public accounts than those of the Republican. Kamala Harris intends to prohibit companies from setting abusive prices for food at the federal level and to veto large concentration operations in the agri-food sector to support competition.
All of these actions would support the Federal Reserve’s battle against inflation, a problem that Donald Trump is committed to combating by eliminating obstacles to oil and gas and promoting the construction of power plants, among other measures.
In terms of housing, Harris has focused on direct aid of up to $25,000 for those purchasing their first home, as well as a tax relief that promote the construction of properties for affordable rental. Trump is betting on tax incentives for home ownership and is also considering providing some type of aid to new applicants.