The Po­ten­tial Im­pact of the U.S. pres­id­en­tial elec­tion out­come on US–EU re­la­tions

Prospects of the U.S. presidential elections & future policies 

In the current US presidential race, key issues driving voter concerns primarily revolve around the economy and inflation, with approximately 80% of voters emphasising the importance of economic matters and 85% expressing concern about inflation. Other influences include healthcare, immigration, and gun control. 

The economy's prominence as a voter concern has escalated since Biden took office in 2021, overshadowing previous issues like domestic politics and immigration. Despite positive economic indicators such as real GDP growth, a thriving stock market, controlled inflation, and pre-pandemic levels of unemployment, voters' perceptions of Biden's economic management are unfavourable.

"Voters' perception matters. They remember the period between 2021 and 2023 when the US faced high inflation and lagging wage growth, likely due to media coverage at the time."

Recent macroeconomic data shows stability, but more people trust Trump over Biden to manage the economy. The discord raises questions about whether voters attribute economic improvements to Biden's policies or if there is an opportunity for Trump to capitalise on dissatisfaction – “clearly there is a disparity between economic realities and public sentiment.”

Other factors influencing the US presidential race include personal traits like Biden's age, and potential misinformation campaigns led by republicans. 

"Household debt has increased significantly after the pandemic, leaving many Americans feeling that their lives have not improved."

The likelihood of a Trump victory is dependent on Biden's ability to handle domestic and international challenges effectively. Trump's supporters demonstrate unwavering loyalty despite legal controversies.

"He is potentially facing many criminal charges but his supporters, around 80%, would still vote for him even if he gets convicted.”

Key swing states like Michigan and Pennsylvania, with key manufacturing sectors, may lean vote for Trump due to incorrect perceptions of economic stagnation. However, with six months remaining until the elections, the landscape could still change.

“Economic voting theory suggests that voters may penalise incumbents for perceived economic mismanagement, potentially swaying swing states towards Republican support.”

Impact on U.S. and EU Relations

"Biden's approach prioritises the restoration of traditional alliances and multilateral cooperation, emphasising commitments to NATO, the G7, and addressing global issues like climate change through international collaboration." 

Biden’s stance would foster closer ties between the US and the EU. Trump's administration would be characterised by a unilateral approach – prioritising American interests over traditional alliances.

“This us versus them dichotomy that Trump practices threatens the EU in the sense that even a single gain by the EU is not okay for Trump. This would strain relations with the EU, particularly due to conflict and the imposition of tariffs.”

The potential tariffs on EU imports could exacerbate existing trade tensions, impacting various industries differently based on the level of differentiation of their products. 

"Trump intends to impose 10% tariff on all imports during his second term. This could alienate the EU and push it towards diversifying its trading partners.”

Efforts to broaden trading partners within the EU might face challenges though given the complexities of global trade dynamics. China may emerge as an alternative partner, but uncertainties of a second Trump administration could complicate such efforts. Concerns arise regarding the potential implementation of more extreme policies under a re-elected Trump administration. 

“This could lead to heightened isolationism and closer ties with authoritarian regimes. Biden's policies would seek a balance between traditional approaches and addressing contemporary challenges.”

Implications for Danish trade and investment

The situation for Denmark is nuanced. While the country heavily relies on trade within the EU, its major exports outside the EU, especially in sectors like pharmaceuticals and green energy, may face challenges.

"One of the biggest Danish exports is pharmaceutical products and it’s a very highly differentiated product. Pharmaceutical products and other differentiated products, are less likely to be subject to tariff rates."

Despite this, short-term effects may be lessened but long-term concerns do arise. The low engagement of Danish firms in global trade could offer some insulation against the impacts of trade wars but also suggest missed growth opportunities. The strength of the Danish krone also adds further complexity to the trade and investment landscape.

“Danish firms' interest in diversifying towards markets like China reflects an acknowledgment of the need to adapt to evolving global trade dynamics. Firms withdrawing from China could complicate these efforts.”

Overall, Denmark and its businesses must navigate carefully balancing immediate effects with long-term plans for diversification. This is crucial as other countries aim to strengthen their position in the EU market. 

“Denmark must think strategically about its trade and investment approaches.”