Trump vs Harris: Contrasting economic plans could shift global market dynamics - expert

Each US presidential candidate offers a contrasting economic approach, with “key differences that could have a direct global market impact and sizable implications for many investors worldwide,” according to Edmond de Rothschild Bank’s Global Investment Research team and Edmond de Rothschild (Israel) Ltd. CEO Nir Yeshaya.

An example of these contrasting approaches is the candidates’ takes on corporate taxation, according to the research team. Vice President Kamala Harris proposes raising corporate tax, which would likely impact high-margin, US-focused sectors such as communications, technology, and energy, said the team.

This could impact consumers reliant on US household spending by causing a decrease in spending by more “affluent consumers,” the bank said.

“On the other hand, targeted tax cuts for low- to middle-income households, combined with support for homebuyers and renters, could benefit basic-goods and low-cost consumer sectors,” it added.

Former president Donald Trump’s approach to corporate tax, however, could include extending tax cuts from 2018 and a possible additional 15% cut to the corporate tax rate for US-based manufacturers, the bank said.

Two stark differences to US trade policy 

This plan could “boost the earnings per share of S&P 500 companies, especially in finance, industrials, and selected consumer sectors,” it said, adding that “reduced regulatory oversight in energy and finance under Trump could spur short-term growth, though long-term stability in these industries might be impacted.”

Harris and Trump also “diverge starkly” on US trade policy, the bank said.

“Trump’s proposal to impose substantial protective tariffs could disrupt global supply chains,” it said, adding that under Trump, import tariffs are expected to reach 10%-20% and potentially 60% for products from China.

“This protectionist stance would significantly impact industries reliant on imports, such as electronics and automotive equipment,” the bank said.

This could hurt profits substantially for large multinationals with overseas production, the bank said, adding that this could possibly be offset by lower corporate tax and “more freedom for companies linked to Trump’s deregulation agenda.”

“Sectors less dependent on global supply chains, such as steel, lodging, financials, and other domestic industries may enjoy a pricing advantage as foreign competitors become more expensive,” it added.

Harris is expected to continue President Joe Biden’s policy of “measured tariffs focused on strategic trade restrictions in technology, protecting America’s edge in critical sectors such as AI and chip manufacturing,” the bank said.

Her trade and domestic tax policies together could “reshape global competition, particularly in technology and defense, while preserving stability across consumer sectors,” it added.

“A Harris victory, with anticipated support for infrastructure investment and economic support for lower-income households, may not drive stock gains in these areas in the short term but could add stability to industrials, basic goods, and renewable energy,” the bank said.

A Trump victory would be “expected to benefit finance, high-end consumption, healthcare, and traditional energy sectors, given expectations of tax relief and deregulation,” it said.

Yeshaya said the US election results would “challenge investors’ ability to adapt their strategies.”

“Given the aftermath of the last US election, caution is warranted until official results are announced,” he said. “A divided government – either a Republican president with a Democratic majority in Congress or vice versa – would likely lead to more compromises and a more moderate impact on various sectors,” he said.

“Until strategic shifts stabilize – primarily in sectors such as technology, consumer products, and energy – flexibility will be key to preserving and growing capital in these turbulent waters,” Yeshaya said.