Vote with Your Wallet: Which candidate do America’s CEOs want to see in the White House?
Joe Hicketts
“Spare a thought for corporate America” is not a phrase often said on the campaign trail. If spoken, it would likely draw similar responses to “I think the amount bankers are paid is just about right” or “I just like vegetables too much”.
However, corporate America has had an interesting couple of months, to say the least, from the highs of the AI boom to the lows of the economy underperforming job growth expectations. But alongside inflation data, there is another show in town: one due to conclude at the polls on November 5. So, if you are the head of a Fortune 500 company, what are the effects of the White House turning either Red or Blue in 2024?
This is all caveated by the fact that the campaign trail is not binding and policies do, of course, change over time. But when looking over each candidate there are general themes that can be drawn.
Republican candidate Donald Trump has been clearer and more detailed than his Democratic counterpart and his policies can be broadly summarised as tax cuts for businesses combined with heavy incentives to repatriate supply chains to the US. Corporate tax rates would reduce from 21% to 15% for companies that produce in the US funded via borrowing and increased proceeds from the oil industry along with a blanket 10-20% tariff on imports.
He would also look to extend the 2017 Tax Cuts and Jobs Act, which reduced corporate tax rates to the current 21%, previously 35%), and made both temporary and permanent reductions on individual tax payments, especially for high earners. Trump is also mooting the idea of a 60% import tariff on Chinese goods with further special tariffs, such as a 200% tariff on Chinese cars produced in Mexico. For someone who is often compared to Ronald Reagan, Trump is certainly no free trader.
In contrast, Democratic candidate Kamala Harris has been somewhat quieter on economics, likely being afraid of being painted by Republicans as a tax raiser. However, she would likely operate as a moderate, similar to the existing Biden administration. The policies she has revealed focus heavily on America’s middle class and include helping with downpayments for first-time homebuyers, increasing child tax credits, and going after alleged price gouging in supermarkets. It’s good politics, if somewhat sparse economics.
Neither candidate’s policies are exactly music to the ears of America’s CEOs, given the choice between Trump’s economic recipe for inflation and Harris’s vagueness and mild economic populism.
In the event of a Trump presidency, a general rule of thumb would be that the longer the supply chain the less ideal the business model, especially if that supply chain has a major presence in China. Furthermore, businesses reliant on consumer spending could end up on a topsy-turvy ride; tax cuts are likely to boost American spending initially, but this combined with restrictions on immigration could end up increasing inflation. Companies like Walmart or Chipotle should take note.
One thing that all CEOs like, regardless of political leanings, is certainty. Would businesses requiring significant lead time in investment stomach a more erratic Trump presidency? Foreign semiconductor or environmental energy firms may not see the benefit in investing five years in a project aimed at getting a US semiconductor fabrication plant up and running, only to see their home country in the crosshairs of a US trade war.
However, lower value manufacturing could see a boost as some production lines are moved back to the US, although economists largely agree that this would be counterproductive. This is perhaps best illustrated in a study which showed that Trump’s 2018 steel and aluminum tariffs resulted in an overall reduction in manufacturing jobs due to an increase in Aluminum price affecting other industries e.g. car manufacturing; tariffs really are the bluntest of all instruments.
Despite this, any corporate tax reductions that Trump implements would obviously be popular although coming at the expense of the deficit. Trump does have a somewhat poor record at balancing the books with his 2016 term causing a $8 trillion rise in the deficit, although approximately half of this was Covid-related relief.
Harris has largely stayed out of the economic picture for the time being bar advocating for an increase to the corporate tax rate to 28%. She’ll likely continue Democrats’ existing policy of subsidies for US manufacturing alongside higher taxes for top earners. She would probably be less abrasive to corporate America, although she does need to put some more flesh on the bones of her economic policy.
With each election cycle sparking fears that the economy could come crashing down under either candidate, it is easy to forget that the economy has been largely motoring on since the end of the Obama days. If the president can be likened to a sailor, then the market forces of inflation, decarbonisation and a more multipolar world can be likened to the waves underneath: the president can try to adjust course, but they cannot reverse the tide. We should not expect huge swings in share prices the morning after the election, especially given that both parties are somewhat protectionist. Congress could also place limits on either candidate.
That being said, Trump’s economic policy is far more radical than the existing Biden one, which is likely to be Harris’s template. The idea of the Federal Reserve being an arm of the president or the deficit increasing to dangerous levels could affect the long-term investment attractiveness of the US. However, short-term, where the candidates differ most is on their approaches to China. The prospect of Trump’s 60% tariff on Chinese goods or 20% on EU goods would start an us-and-them approach to American economic policy which would affect companies both big and small.
While neither Trump nor Harris will be able to totally reshape economies or big America’s bottom line, companies with big global supply chains such as Apple or Nike should watch closely on November 5, just like the rest of us.
Joe Hicketts is a former finance worker from London now residing in Japan who trained as an Engineer with a First Class Mechanical Engineering degree from the University of Birmingham, but with a passion for Geopolitics and Economics. While working in Finance he gave presentations on topics such as: Overview of the Chinese Property Market, Causes and Long Term Impacts of Global Labour Shortages and Long term Future of Cryptocurrencies and CBDCs. He is seeking a role in an International Relations/Economics related field. Feel free to contact him via Linkedin.
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