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Elections are being held again in the USA. Every four years, it is decided who will lead the world power and one of the world’s largest economies; This directly affects Switzerland and our economy.
It looks like a race between incumbent Democrat Joe Biden (81) and his Republican predecessor Donald Trump (77). At first glance, both represent a completely different regime; Depending on the outcome of the elections, the effects on the Swiss economy are equally different. St. Stefan Legge (36), macroeconomist and lecturer at the University of St. Gallen, explains how a republican or democratic mandate could affect the Swiss economy using three main points.
USA as trading partner
The United States is an important trading partner for Switzerland in terms of both exports and imports. During Trump’s last term, “America first” was emphasized. The (punitive) tariffs he imposed to encourage American companies and US production caused great damage to Swiss industrial companies.
From a Swiss perspective, Trump is considered a model student when it comes to free trade agreements; because at least negotiations were held with Bern during his term of office. However, Stefan Legge says the negotiations are not very serious. Trump has never pushed for a free trade agreement any more than Joe Biden does now.
Biden’s industrial policy, which includes a multibillion-dollar legislative package and subsidies to stimulate the economy, looks very attractive for Swiss companies in the short term, but in the long term it could lead to a “subsidy race” in which countries with deeper pockets have a competitive advantage. “The race to the bottom is easier for Switzerland than the race to the top,” Legge said, pointing out that tax cuts bring much more for a small economy like Switzerland.
The Inflation Reduction Act (IRA) passed by Biden could make it harder for local pharmaceutical companies to do business in America. The IRA has an impact on drug prices in the USA, among other things Novartis, Roche and Co. will have to renegotiate prices for the American market, on the other hand there will be a price cap. Previously, drugs were about 40 percent more expensive in the United States than in Europe; This was a lucrative business for the pharmaceutical industry.
US military policy
Europe has an external security policy. This means that the EU, and thus partly Switzerland, is dependent on the USA in this area. As Trump thinks less ideologically and more in the short term, he may diminish America’s role as guarantor of security in Europe. Legge cites a quote from Republican Senator J.D. Vance, 40, that the United States has customers, not allies. “This sentiment is widespread among Republicans,” he says.
The expert thinks that his approach is more advantageous due to Joe Biden’s active role in military policy. Biden, like many establishment Democrats, still sees the United States as the “world policeman.” This approach is indispensable, although not uncontroversial; because “Europe is not equipped for its own security policy”.
US and world politics
Switzerland is a small economy based on rules-based order and trade. But Trump represents anything but the rules. The trade dispute with China also shows this. Trump’s “punitive tariffs” on steel and aluminum imports set off a spiral, for example, with Beijing responding with its own tariff increases and Great Britain imposing “retaliatory tariffs” on alcoholic beverages and other consumer goods. “If there is a global shift in power politics – the stronger and bigger wins – then we are going to have tough times,” says Legge.
On paper, Biden is more committed to the rules-based order, but Trump’s presidency is so radical that it is impossible for Biden to scale back tough policies on foreign economies — precisely because they are so popular with voters. He reduced Trump’s high tariffs on steel and aluminum, but only on products from Europe. Maintained tariffs on China. The so-called “CHIPS and Science Law”, which came into force on August 9, 2022, is also intended to harm China. The law provides approximately $280 billion for domestic production of semiconductor chips in the United States. Electronics are considered one of the most important export goods of the People’s Republic of China.
Solution: Trump has permanently changed world trade; Biden can’t reverse this now. According to Legge, even if Trump is a more radical president in terms of global politics, Biden will not be a better choice in terms of the local economy.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
