Nomura

Economic policy under a Biden administration

  • If Biden wins in November, he is likely to usher in a new set of US economic objectives and policies.
  • Addressing the ongoing pandemic, green infrastructure and promoting equality would be top priorities.
  • The breadth of Biden’s agenda that would become actual policy depends on the November Senate elections.

With the impending US elections this November, we are yet to know the full extent of the outcome under the different administrations. However, based on widely reported polling data, former Vice President Biden appears to have a significant lead that has been maintained since earlier this summer. This note considers the outlook for economic policy if Biden wins the election.

The presidential candidate’s proposals for economic policy seem to be designed to promote two distinct objectives: recovery from the Covid-19 economic contraction and transforming the economy to generate more desirable outcomes. As the pandemic continues to be a significant threat to both the global and domestic economy, the public health response should be an economic priority. Extending current fiscal support – including enhanced unemployment benefits, support to small businesses, state and local governments, schools, etc. – will require immediate attention in the earliest days of the administration.

A large infrastructure bill with an emphasis on climate change is likely to be the first major legislative economic initiative, after ensuring that basic fiscal support – such as unemployment insurance – is extended.

Other priorities that Biden is likely to pursue, in the infrastructure bill or through other means, include: a higher minimum wage, greater access to healthcare, paid sick leave and childcare, strengthening unions, increasing the tax burden on corporations and high income individuals, promoting competition, particularly for technology companies, and strengthening education and immigration programs.

In addition, US relations with the rest of the world are likely to improve and normalize to a significant degree, with being more mindful of allies and respectful of the processes of international relations. However, regardless of the election results, US-China friction is still cause for concern over the medium term, although Biden is may be more likely to resort to sanctions as opposed to tariffs when advancing his agenda.

With India, the US has historically been natural allies due to shared democratic values. Despite far and few trade frictions, there has been continued engagement on foreign policy. India is a member of the Quad alliance (along with US, Japan and Australia) and acts as an important counter-balance to China’s influence over the region. Under a Biden administration, we expect the relationship to prosper.

In ASEAN, it is not clear whether a Biden presidency would be positive to the region’s economic prospects. A less confrontational US foreign policy would definitely be a welcomed relief for ASEAN countries. However, if US-China tensions persist, and the higher tariffs imposed on Chinese imports are unlikely to be rolled back, then regional growth prospects may continue to be weighed on by weak exports and remaining protectionist policies.

With regards to Japan, we are not yet clear whether the US-Japan relationship on various fronts will return to “normal.” Biden and the Democrats made clear their plan to revert the retaliatory tariffs that the Trump administration imposed, but there has been no indication of whether they would return the US to a multilateral free trade regime under a Biden presidency. We could also see a major shift in global climate change policy which in effect will attract greater attention in Japan too with more focus on the green-themed government policy, corporate activities and innovation from H2 2020 through 2021.

Under Biden, South Korea would face a completely different situation to its current one. On the bright side, we would first expect less disruptive foreign policy, which should reduce business uncertainty. This, combined with Biden’s proposal to promote a green economy, should aid the recovery in global capital spending. We see this benefitting Korea’s economy in two ways. First, green initiatives should enable Korea’s companies to implement more aggressively new growth strategies that will accelerate the ongoing industrial restructurings in the domestic economy. Secondly, the US return to the Paris climate accord will likely expand markets for green economy.

On geopolitics, Australia has a strong multi-decade relationship with the US, spanning several governments on both sides. We would expect this strong working relationship to continue following a Biden win. We expect Australia-China tensions to continue, given a) our expectations that US-China tensions will continue, with somewhat different focus; b) Australia’s continuing close defense ties with the US; and c) the continuing economic rise of China, to name a few.

Moving west towards Europe, we are likely to see positive impact as a result of a likely larger US fiscal stimulus (which will have spillover effects for Europe), improved diplomatic relations and a lower risk of tariffs imposed on auto imports from the EU to the US. However, there are questions surrounding the ease with which a UK-US trade deal might be agreed under a Biden administration.

For a deep dive into each economy’s outlook under a Biden election, read our full report here.

Contributor

  • Lewis Alexander

    Chief US Economist

  • George Buckley

    Chief UK & Euro Area Economist

  • Ting Lu

    Chief China Economist

  • Takashi Miwa

    Chief Japan Economist

  • Euben Paracuelles

    Southeast Asia Economist

  • Andrew Ticehurst

    Rates Strategist, Australia

  • Sonal Varma

    Chief Economist, India and Asia ex-Japan

  • Craig Chan

    Global Head of EM Strategy

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