Biden vs Trump: key policy implications of either presidency

• The US 2024 election is likely to be a rematch between the Democratic incumbent, Joe Biden, and the former Republican president, Donald Trump.

• Policy outcomes would be starkly different under the two administrations. The race is likely to be extremely close, which will keep policy uncertainty high. 

• The focus on “out-competing” China and on rebuilding US industrial capacity would continue under either administration. 

• However, likely policy outcomes diverge significantly in most other areas, most notably on trade, fiscal, immigration and foreign policy. 

For now, our forecast assumes that Mr Biden will win, which would imply broad policy continuity from his first term. However, the race will be extremely close, and policy outcomes would differ significantly under a Trump administration. Control of the next Congress is another source of uncertainty. Our forecast assumes that Congress will remain divided, with no party controlling either chamber and relatively thin majorities constraining the scope for legislative action. As a result, both Mr Biden and Mr Trump would see some of their core policy proposals watered down significantly or blocked outright by Congress, most notably on tax reform, public spending and investment. 

Industrial competitiveness and the Inflation Reduction Act

Rebuilding US industrial capacity, particularly through near-shoring, and boosting supply-chain security will be priorities for either administration. However, their approaches would differ significantly. Mr Biden would focus on continuing to deliver on the landmark policies of his first term: the Inflation Reduction Act (IRA), the CHIPS and Science Act and the 2021 infrastructure investment bill. We expect that a Biden administration would double down on recent investments in clean technology and the climate transition, but Congress would limit any attempt to increase IRA spending significantly.

Mr Trump has said that he will hollow out the IRA by repealing its clean industry tax credits, but achieving this would be difficult. By 2025 the plan will have been in place for more than two years, and uptake has already been massive. Removing incentives will be more politically difficult than capping spending; we expect private-sector pushback, which is one of the reasons why we expect the IRA to survive. However, some elements could be chipped away, including funding for conservation, forestry, building efficiency, and other Department of Energy grants and loans. Tax incentives for future projects could also be at risk. Mr Trump would probably free up currently protected federal land for drilling via executive action, and could propose new tax incentives for domestic oil and gas production.

Trade and near-shoring

Regardless of who wins the presidency, we expect the US to continue the protectionist streak that has developed over the past decade. We do not expect the US to join major free-trade groups or to expand the trade component of other economic partnerships, such as the Indo-Pacific Economic Framework for Prosperity. Mr Biden’s focus on US industrial incentives will continue to support trade growth within North America, given strong near-shoring demand. This will benefit Canada and particularly Mexico, which is fast-cementing its position as a regional industrial hub.

Trade policy is one of the main risks to our forecasts under a potential Trump administration. Mr Trump has said that he plans to impose a 10% tariff on all imports. The US currently applies an average 3% tariff rate on global trade (excluding China). Even if Canada and Mexico are effectively exempted under the United States-Mexico-Canada Agreement, this would be a major escalation of US trade protectionism, which would inflame tensions with major trade partners. There would be significant pushback from the domestic private sector, particularly assuming that the tariff stokes inflation (and therefore interest rates). We expect that Mr Trump would introduce a blanket tariff, but that this would be quickly watered down by exemptions for major trade partners, such as Japan, South Korea and the EU (most likely in exchange for policy concessions). Nonetheless, tariff threats would disrupt trade and create policy uncertainty that would undermine near-shoring investment across North America.   

US-China rivalry  

Efforts to compete with China will increasingly dominate US foreign policy, regardless of who wins the presidency. Although the Biden administration has left most Trump-era trade tariffs in place, it has pivoted towards non-tariff barriers as the main tool in its economic rivalry with China. Thus far, these have mainly been linked to national security concerns, such as restrictions on US investment in entities linked to China’s military and semiconductor export bans. As competition deepens, new industries are likely to be affected by such measures, including electric vehicles and renewable energy. An escalation could result in outright bans on Chinese investment into strategic industries.  

We would expect a second Trump administration to take a similar approach. We believe that neither administration is likely to push this competition so far as to force a bifurcation of global markets, given the economic disruption that this would cause.

Immigration

The two candidates are diametrically opposed on culture war issues such as immigration, voting rights, gun control and abortion. These, particularly immigration, will be core themes of the 2024 election. Mr Biden started his term with a more liberal approach to immigration, but a spike in arrivals at the southern border with Mexico has forced him to differentiate his strategy: although he has sought to formalise and open channels for legal migration, he has also toughened controls on illegal migration and introduced more restrictive asylum procedures. We believe that Mr Biden will probably have to toughen his stance further during the campaign in response to pressure from Mr Trump, for example through stricter enforcement of asylum policies and increased funding for border security. 

Under a potential Trump administration, we would expect even tighter control of migrant arrivals, including the likely reimposition of the so-called Muslim travel ban, increased funding for border-wall protection and other deterrence strategies, and increased focus on migrant expulsions. For example, in December the Republican-led Texas state government passed a law (which is likely to be challenged in the courts) to allow US police to arrest migrants suspected of entering illegally. Policies such as this could proliferate under Mr Trump, including restrictions on legal pathways for labour migration, exacerbating the worker shortages that already pose obstacles to the US’s near-shoring drive. 

Fiscal policy 

Both candidates would seek to rein in recent growth in the US fiscal deficit, but their approaches would vary significantly. Both would see their proposed reforms hemmed in by a divided Congress. Mr Biden would seek to raise taxes on corporations and high-income households, as proposed during his first term, and would want to allow Mr Trump’s 2017 tax cuts to expire in 2025. He would also seek to raise spending again from 2025, particularly on social programmes; however, assuming that this would not be accompanied by tax reforms, any increase would be modest.

Mr Trump and key advisers have discussed further across-the-board tax cuts, potentially taking the corporate tax rate as low as 15%, from 21% currently. Mr Trump spent liberally during his first term, but spending plans for a second term would be influenced by the hard-right fiscal hawks that have gained influence in Congress. We think it most likely that Mr Trump would increase spending modestly and attempt to offset this with receipts from import tariffs (advisers have suggested that this could be returned to households as a dividend, but this remains highly uncertain). 

Engagement in foreign conflicts

Foreign policy outcomes under the two administrations would be one of the main points of difference. Mr Biden would continue to show firm support for Ukraine. However, waning public support for continued US engagement and domestic funding pressures in 2024-25 will limit the amount of financial and military support that the US will provide (albeit from a high base). Although Mr Trump would look to boost military spending overall, he has shown a distaste for prolonged overseas military engagements and a tolerance for Russian aggression in recent years. We believe that Mr Trump would be in favour of withdrawing military and financial support for Ukraine. The rest comes down to Congress; support for Ukraine is still bipartisan, but assuming that political polarisation remains high, very little funding is likely to pass Congress without firm White House support. 

Regarding Middle East policy, the US will maintain its long-standing alliance with Israel under either administration. However, this support would be more full-throated under Mr Trump, whereas Mr Biden would be more mindful of avoiding the escalation of existing flashpoints, including the Israel-Hamas conflict. The risk of potential direct US-Iran confrontation would rise significantly under a Trump administration, given that any prospect of a normalisation of US-Iran relations would disappear.  

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.