As the 2024 U.S. presidential election draws near, investors and experts are closely examining its potential macroeconomic and policy ramifications. The outcome, whether it be a second term for President Biden or the return of former President Trump, could lead to significant shifts in key policy areas, including immigration, trade, fiscal policy, and industrial policy. A new analysis by JPMorgan analysts sheds light on these potential changes and their economic impacts.
Potential Outcomes of the Election
The 2024 election presents two starkly different scenarios: a continuation of President Biden’s policies or a resurgence of former President Trump’s agenda. Each scenario brings unique implications for the economy and various policy domains.
Immigration Policy
Biden’s Approach to Immigration
President Biden has maintained high immigration levels while implementing stricter border entry regulations. This approach has increased the labor supply and consumer demand, contributing to employment growth and low housing vacancy rates despite strong house completions.
Economic Impact of Biden’s Immigration Policies
Biden’s immigration policies have had a positive effect on the economy by ensuring a steady supply of labor and bolstering consumer demand. These factors have helped sustain employment growth and stabilize housing markets.
Trump’s Proposed Immigration Policies
In contrast, Trump has pledged to close the southwest border and initiate mass deportations of undocumented immigrants. This approach could significantly reduce the labor supply and consumer demand, potentially leading to higher unemployment rates and increased housing vacancies.
Potential Economic Consequences of Trump’s Immigration Policies
JPMorgan analysts warn that Trump’s immigration policies could negate the positive economic effects of increased immigration. A decrease in labor supply and consumer demand could result in higher unemployment and more vacant housing, negatively impacting the overall economy.
Trade Policy
Biden’s Stance on Trade and Tariffs
The Biden administration has maintained many of Trump’s tariffs on Chinese imports. However, Biden’s approach to trade policy is generally more measured and aimed at fostering stable international relationships.
Trump’s Proposed Trade Measures
Trump has suggested even more drastic trade measures, including a 60% tariff on all Chinese imports and a 10% universal duty on all imports. These proposals aim to protect American industries but could also lead to significant market disruptions.
Impact of Trade Policies on the Economy and Stock Market
JPMorgan analysts note that the impact of tariffs on economic growth might be less than anticipated. However, the announcement of Trump’s tariffs during his first term had significant adverse effects on the stock market, highlighting the role of policy uncertainty in economic outcomes.
Fiscal Policy
Biden’s Fiscal Policies
Under Biden, fiscal policy would likely continue the main elements of the 2017 Tax Cut and Jobs Act (TCJA) for individuals earning less than $400,000. Biden also plans to raise the GILTI tax rate to 21% and increase the corporate tax rate from 21% to 28%. These measures are expected to generate significant revenue, offsetting costs from other tax credits and contributing to GDP growth.
Economic Implications of Biden’s Fiscal Strategies
Biden’s fiscal policies aim to balance revenue generation with economic growth. By maintaining tax cuts for middle and lower-income earners while increasing rates for higher incomes and corporations, Biden seeks to promote equitable economic growth and reduce income inequality.
Trump’s Fiscal Proposals
Trump’s economic proposals are less detailed but call for extending all TCJA provisions and potentially introducing a comprehensive tax reduction. These measures aim to stimulate economic activity across all income levels.
Potential Effects of Trump’s Fiscal Policies
JPMorgan analysts suggest that Trump’s fiscal policies could lead to higher corporate tax rates if he needs to compromise with a Democratic-controlled House. Additionally, revenue from higher tariffs could finance the extension or expansion of the TCJA, impacting overall economic growth.
Industrial Policy
Biden’s Industrial Policy and the Green Transition
Biden’s administration has promoted significant investments in semiconductor and clean tech manufacturing through the Inflation Reduction Act (IRA) and the CHIPS Act. These efforts aim to drive the green transition and support industrial growth.
Risks to Green Investments Under a Trump Administration
Under the Trump administration, opposition to green initiatives could threaten substantial investments in clean tech and semiconductor manufacturing. However, JPMorgan analysts believe these risks are manageable for two key reasons.
JPMorgan’s Analysis of Industrial Policy Risks
First, it is unlikely that Republicans would have the power to entirely abolish the IRA. Second, much of the IRA and CHIPS Act funding benefits Republican-leaning regions, which could moderate opposition to these initiatives.
Antitrust Law
Biden’s Aggressive Antitrust Enforcement
Biden’s administration has taken an assertive stance on antitrust law, targeting major tech firms like Google and Meta. This approach aims to foster competition and prevent monopolistic practices.
Potential Changes Under a Trump Administration
A second Trump administration might adopt a more lenient approach to antitrust enforcement, potentially reducing regulatory pressures on big tech firms.
Impact on Major Tech Firms
Despite Biden’s tough antitrust enforcement, the labor share of income remains near all-time lows, suggesting that industrial trends are deeply entrenched and unlikely to change rapidly with a shift in the White House.
Economic Forecast and Investor Sentiment
JPMorgan’s analysis indicates that the 2024 election could have significant implications for the economy and investor sentiment. Different policy outcomes will shape market reactions and economic forecasts, influencing investment strategies.
What are the main differences between Biden’s and Trump’s immigration policies?
Biden maintains high immigration levels with stricter border controls, boosting labor supply and demand. Trump proposes closing the southwest border and mass deportations, which could reduce labor supply and demand.
How might trade policies change depending on the election outcome?
Biden’s trade policies focus on maintaining current tariffs and fostering stable international relations. Trump suggests drastic measures like high tariffs on Chinese imports, potentially disrupting markets.
What fiscal policies can we expect under Biden or Trump?
Biden aims to continue tax cuts for lower earners while raising taxes on higher incomes and corporations. Trump proposes extending TCJA provisions and introducing comprehensive tax reductions.
How could the green transition be affected by the election?
Biden supports green investments through the IRA and CHIPS Act. Trump’s opposition might threaten these initiatives, but Republican-leaning regions benefiting from these investments could moderate opposition.
What are the potential impacts on major tech firms?
Biden’s administration takes a tough stance on antitrust enforcement against big tech. A Trump administration might adopt a more lenient approach, reducing regulatory pressures on these firms.
