With the U.S. presidential election just around the corner, the stakes are high, not just for Americans but for the entire globe. Voters are gearing up for what promises to be one of the most dramatic races yet, pitting incumbent Vice President Kamala Harris against former President Donald Trump. The race is already heating up, and economic indicators suggest it will have lasting ramifications beyond U.S. shores, particularly for Europe.
The upcoming election is not merely about who will occupy the White House, but how the outcome might alter the precarious economic balance on the other side of the Atlantic. The old continent relies heavily on U.S. for trade partnerships and defense agreements, and with rising economic volatility, slipping competitiveness, and security concerns stemming from Russia's aggression toward Ukraine, the election's outcome feels increasingly pivotal.
According to the latest analyses, Trump is likely to resurrect his previous approach of implementing heavy tariffs on European imports. Experts warn this could escalate prices for European goods, forcing consumers to tighten their belts. For example, Trump has indicated plans to increase tariffs by up to 20%, which would add significant costs to transatlantic trade, potentially crippling European industries.
“Tariffs will seriously dampen the EU’s economic growth,” states Zach Meyers, assistant director at the Centre for European Reform. This prospect worries many economists, especially with studies indicating Germany—an economic powerhouse—could see its GDP shrink by as much as 0.23% as affected populations grapple with rising costs and dwindling purchasing power.
Conversely, Harris's strategy is believed to lean toward diplomacy rather than confrontation. While she may push for more stringent scrutiny of China, especially after the U.S. instigated cuts on Huawei, her administration aims to maintain stronger commercial ties with Europe. Yet, some experts caution this approach may not be enough to counteract the business uncertainties the election will undoubtedly multiply.
The election's outcomes could lead to heightened concerns among businesses about regulatory changes and international trade dynamics. Knightley, ING’s chief international economist, pertinently points out, “There is concern about significant changes to both the economic and geopolitical environment.” Unsurprisingly, the looming shadow of Trump’s “America First” policy generates substantial uncertainty for European firms.
Turning the lens toward defense, many analysts argue the potential geopolitical repercussions of how either Trump or Harris approaches international relations could be destructive for Europe. The continent’s past inadequacies in defense investments have left it vulnerable, particularly with the backdrop of the continuing unrest stemming from the Ukraine conflict. The reliance on the U.S. for military support is at its peak, which means U.S. policy changes could have dire consequences.
“The Trump effect on Europe will be negative—more negative than it would be under Harris,” argues Steven Blockmans, of the Centre for European Policy Studies. Known for his criticism of NATO's funding dynamics, Trump has drawn doubts over whether he would maintain America’s commitment to the alliance, especially considering his past comments favoring Russia.
Harris, on the flip side, is expected to adhere more closely to Biden’s established policies, aiming to uphold traditional alliances and offer steadfast support to Ukraine against Russian encroachment. Either way, political analysts are concerned: if Trump reclaims the presidency, it might embolden right-wing leaders across Europe, sparking political turmoil and social unrest not seen since the height of the migrant crisis.
Meanwhile, back home, the economic situation does not paint the most favorable picture for either major party candidate. Although official statistics tout low unemployment rates and GDP growth, much of the population’s sentiment does not reflect such positive numbers—indicating what some have termed as “vibecession.” This disconnect between the economic indicators and the lived reality of average American households is particularly glaring; many are still reeling from the pandemic's aftermath and rising costs of living. Data shows 60% of respondents see the state of the economy as “not so good” or “poor,” and personal eroding living standards during the pandemic only amplify this view.
Even with the economy barreling along at about 2.5% growth, rising prices for consumer goods and services have put many people on edge. Many Americans are feeling the pinch with costs associated with health care, housing, and essentials rising sharply. The gap between the top 1% of earners and the rest of the population continues to widen, with the wealthiest household types owning substantially more of the nation’s resources. Underlining this socioeconomic disparity, the fact remains: average wages have not kept pace with inflation, leaving many Americans doubting economic recovery.
All this begs the question: why, amid optimistic GDP figures, does the electorate still show such skepticism toward the sitting administration? The answer is rooted deep within personal experiences, with many feeling completely detached from the stock market’s highs and financial indices. Americans are wary, and their sentiments manifest not just politically but economically as well.
The looming election clashes with broader efforts to grapple with inflation and higher interest rates, with the Federal Reserve likely facing mounting pressures from all sides. Based on the latest reports, the Fed is expected to announce interest rate cuts shortly after the election results. A slight decline may help ease pressure on households burdened with rising debts and expenses, but uncertainty hangs heavy, with little faith among voters about whether such measures will truly stabilize living conditions.
Truly, the outcome of this election isn’t just pivotal; it could rewrite the parameters within which economic growth, trade relations, and security collaborations evolve. The results could determine how both domestic and international stakeholders navigate the challenging waters of the post-pandemic recovery, setting the tone for how nations interact across the Atlantic well beyond election day.
It’s also worth pondering—what if the results are contentious? A narrow victory could lead to protests and social unrest, complicatively impacting market sentiments. History shows it can be treacherous to predict outcomes and subsequent reactions, but as analysts turn their focus toward what’s next, one thing seems certain: both candidates embody starkly divergent paths forward.
So as Americans prepare to cast their votes, the consequences of the election reach far beyond national borders. It appears the choice made today will ripple through the international economic framework, shaping not only future U.S. policies but also the fortunes of allies and partners abroad. It’s something the world will watch closely as the dust settles after 5 November, awaiting the final verdict of the electorate.
