Experts and analysts from many walks of life have been mulling over what effect the two presidential candidates (Trump/Harris) will have on the economy of the United States. Both candidates have very different visions of an economy that they will build if/when they get elected to the office of President of the United States of America. Below are some of the differing policy decisions the candidates will make as they try to shape America’s future.

1. Trade policy

Trump

During his first and only term as President of the United States Donald Trump ushered in a new era of trade policy for America by introducing tariffs. Once again, he has promised to put his “America First” policy back on track with greater fervour than before. Donald Trump has informed the voters that he will introduce a baseline tariff of 20% on all imports with a 60% tariff on any imports from China. He has further promised massive new tariffs on those countries that abandon the US Dollar and all imports of cars from Mexico. 

Trump has said that these new tariffs will fund everything from child care to tax cuts, but experts are sceptical as they suggest that the tariffs won’t come close to creating the revenue this policy requires. Indeed, such experts suggest that the best case scenario is that tariff revenue could be between circa USD 200 – USD 400 Billion per year, but these numbers would drop as trade realigns. Furthermore, Trump has promised voters that he will revoke China’s “Most Favoured Nation” status, along with banning Chinese investors from buying US real estate or companies, and he has vowed to keep United States Steel Corp in US Ownership, blocking a potential sale to the Japanese.

Harris

Kamala Harris has issued very little in the terms of trade policy but has vowed no major departure from President Biden’s current trade policies, which have retained all of the Trump’s administration’s tariffs, plus adding a couple of new ones. She has also agreed with Trump, vowing to keep US Steel Corp in US ownership, and has gone on to say she will make available tax credits to help businesses in the United States compete with China. However, she has warned voters that Donald Trump’s promised increase in tariffs for all imports would increase the costs for consumers and argues that it is nothing more than a National Sales Tax. Experts suggest that Harris is expected to expand and enhance the United States domestic technological and economic strength by promoting resilient and diversified global supply chains. Political commentators suggest that voters will be swayed by the fact that Vice President Harris’s trade stance is not that of Donald Trump. 

2. Immigration

Trump

Donald Trump has announced he will complete the wall on the Mexican US border which he started in his first term, whilst deporting millions of undocumented migrants. His party, the GOP (Grand Old Party), are running on a platform where they promise to end “a tidal wave of illegal aliens, deadly drugs, and migrant crime.” 

Harris

At the start of her term Vice President Harris was mandated to tackle immigration, however that has sadly failed as there has been a surge of migrants across the border. Indeed, under the Biden/Harris administration there has been a surge in border crossings culminating in December 2023 when in excess of 300,000 migrants crossed into the United States. However, in June 2024 these numbers finally fell after asylum restrictions came into effect. Kamala Harris has said very little on immigration policy, but has pledged to re-introduce legislation that will clamp down on border crossings. 

3. Housing

Trump

Former president Trump has proposed that if he wins the White House he will repurpose some federal land to build new homes, whilst promising to reduce the cost of homebuilding by severely reducing the amount of red tape. He also affirms that his policy on immigration will have the effect of reducing the purchase price of homes, making them much more affordable.

Harris

Like Donald Trump, Vice President Harris has also proposed repurposing some federal land to build new homes. Her platform also wants to help first time buyers with down payments on homes, proposing support of up to USD25,000. Furthermore, she has also proposed a fund with USD40 Billion to support innovations in home building whilst offering tax incentives to those builders who work on starter homes. Elsewhere, she is suggesting she will target certain landlords with new measures because they raise rents by utilising price-setting tools. 

There have been some negative comments by related market experts who advise that the United States has two problems in this area, lack of housing and affordability. They acknowledge that Harris’s proposals are to tackle both problems at the same time, however they feel her policies on housing will make purchases less affordable. Their reasons are fairly straightforward, as subsidies given to new home buyers will inevitably push up demand as building new homes will take time to deliver. As such, this will push the prices up and make it an increased pay-day for sellers. 

4. Inflation

Trump

One of Donald Trump’s major promises is to keep inflation low, and energy makes up a key part of this promise. Indeed, he argues that offering new land for drilling and tax relief on gas and oil producers, reducing the time it takes to obtain approvals for permits, licences, and pipelines, will boost oil and gas production and will help bring costs down. However, sceptics point out that unless the Republicans control congress it would be difficult to pass such legislation.

Harris

A lot of Vice President Harris’s rhetoric is all about middle-class families and lowering their costs. In the health care arena she is proposing a USD35 limit on insulin payments and on prescription drugs out of pocket costs will have an annual cap of USD2,000. Regarding groceries, Harris has proposed a federal ban on price gouging, whilst introducing new penalties for those companies who infringe, violate or flout pricing rules. These proposals have been greeted somewhat sceptically by certain economists and analysts. 

Experts note that since March 2020 food prices have risen by 25% making it more difficult for households to live. Data released show that over the past few years profit margins at grocery stores were fairly flat, meaning that these shops were raising prices in face of supply chain disruptions and rising costs, not gouging customers. 

To conclude

A number of experts and analysts suggest that, although Vice President Harris and former President Donald Trump come from vastly different places, both sides agree to deploying tariffs, stopping takeovers of US firms by foreign predators and above all running the largest deficits in the history of the United States, even when the economy is flourishing. As far as the election goes, once again America is deeply divided, it will be the swing states that call this election, and with only a short time to go, it is anybody’s guess. 

According to data supplied by Bloomberg’s Dollar Spot Index, the US Dollar has fallen just under 1% in September 2024, and is currently in the longest monthly losing streak since January 2023. Experts suggest that currency traders feel the US Dollar is in for more losses after the Federal Reserve cut interest rates by 50 basis points on 18^th September, with analysts suggesting that sentiment is still bearish, with traders having already taken into account the impact of lower cost of borrowing. 

Since late June 2024, financial markets were getting more confident that the Federal Reserve would soon begin to cut interest rates and as a result the US Dollar Index has fallen by circa 3.6%. A downward trend that has continued since and since 18^th September. With the United States election becoming imminent and the debate surrounding the rate cut intensifying, there are some strategists who are advising their clients to completely avoid the US Dollar. 

Data shows that markets and investors are engaging in more cross-currency exposure and giving the greenback a miss, so profits from trades such as buying GBP against the New Zealand Dollar or shorting the Swiss Franc against the Japanese Yen will be regardless of the outcome of the US election, or any fiscal policy announced by the Federal Reserve impacting the US Dollar.  Interestingly, data released by the BIS (Bank for International Settlements) reveals that on average the US Dollar accounts for one side of 88% of trades in a market valued at USD7.5 Trillion per day, so for the greenback to be avoided shows the uncertainty surrounding the currency.

Experts suggest that the US Dollar could well remain weak as the financial markets hunt for clues in economic data which might suggest the pace at which the Federal Reserve will cut interest rates. A number of analysts agree on a 25 (1/4 of 1%) basis points cut in November, however in the swaps markets experts are suggesting that there is a better than 50% chance of a bigger cut in rates. Therefore, the swaps markets feels that future interest rate movements are downwards, so fixed rate notes are betting on a bigger rate cut than 25 basis points.

However, as of 30^th September, the Federal Reserve Chairman Jerome Powell adopted a more hawkish tone on the economy leaving financial markets, indicating that interest rates will only be cut by 25 basis points in November’s meeting. The dollar index rose .42% on the news, but as always the Federal Reserve’s decisions will be data driven, so it is still open season on whether the US Dollar continues its slide or not. Furthermore, analysts suggest that a Harris presidency will promote a stronger dollar whilst a Trump presidency will promote a weaker dollar.

Bitcoin ,the original and most famous cryptocurrency, is currently enjoying a market capitalisation in excess of USD1.1 Trillion. The coin is having its best September ever due mainly to a swathe of interest rate cuts that were headlined by the Federal Reserve, who slightly surprised some parts of the financial markets with a full 50 basis point cut. This has helped Bitcoin show a gain of 10% in September 2024, which is in total contrast to previous Septembers stretching as far back 2014, where the average decline has been circa 5.9%. 

The correlation between the Federal Reserve’s monetary policy and Bitcoin is at its highest in comparison with other central banks monetary policies. A number of central banks, including the Federal Reserve, cut interest rates in September allowing investors to look elsewhere for returns bidding up many opportunities, including stocks, gold, and cryptocurrencies, while at the same time expecting further rate cuts in the near future.

Bitcoin is a decentralised asset and was originally a technology for payments, however today it is regarded as an investment, and a hedge against inflation. Over the years Bitcoin has, despite being subject to extreme volatility, experienced tremendous growth, and has recently outpaced gains in major stock indices, making it an attractive alternative to traditional portfolio investments. 

Furthermore, September gains have also benefited from US Spot Bitcoin ETFs (Exchange Traded Funds), which is gaining in attraction to both institutional and retail investors. Indeed, September 26^th, 2024, the Bitcoin ETFs recorded a net daily inflow of USD365.57 Million, the largest inflow since the end of July this year. Data shows that since Bitcoin ETFs were launched, net inflows have reached an impressive level of USD18.31 Billion. Another factor that might have added to Bitcoin’s impressive September are the effects of April 24^th halving* beginning to filter through.

Interestingly, a number of experts have advised that Bitcoin follows global liquidity trends 83% of the time over any twelve-month period, (more than any other asset class). They have highlighted that if on-chain Bitcoin metrics** are combined with global liquidity, it gives a deeper understanding of Bitcoin’s price cycles therefore opening up potential investment opportunities. 

*Bitcoin Halving – Halving or “The Halvening” occurs roughly every four years with the latest halving occurring on 20^th April 2024. This event reduces the rate at which Bitcoins are created by 50%, which can potentially lead to price appreciation if demand remains constant or increases.

**On-Chain metrics – refer to data from a blockchain ledger that can be analysed to get a greater understanding of market sentiment and offers insights into various aspects of Bitcoins network health, economic activity and investment trends.