Coface: The outcome of the US election could intensify the overheating of the US economy

Coface: The outcome of the US election could intensify the overheating of the US economy

Coface: The outcome of the US election could intensify the overheating of the US economy

The result of the elections in the United States could have significant consequences on the American economy, fueling the risk of economic overheating, writes Ziarul Financiar.

Thus, depending on the political direction adopted, decisions regarding international trade, fiscal policy and the establishment of interest rates could undergo important changes, influencing both the domestic business environment and external economic relations, notes a Coface analysis.

“On November 5, Americans will head to the polls to decide between former President Donald Trump (Republican) and Vice President Kamala Harris (Democrat). The result depends on a few key in which no clear favorite emerged. In addition to the presidency, control of Congress is at stake: Republicans need just two seats to retake the Senate, while Democrats need a net gain of four to retake the House. A divided Congress is likely to appear, although a trifecta – control of both chambers and the presidency by a single party – remains possible”, say the Coface specialists.



From their perspective, a second Trump presidency would result in the strongest escalation of protectionist policies in recent history, as the Republican candidate wants to impose a 60% tariff on all imports from China and, most importantly, a general tariff of 10-20% on imports from all trading partners, allies or not.

“This would represent a substantial cost to American businesses and consumers and would severely disrupt global value chains.”

As for Harris, Coface analysts believe she will likely continue a more strategic and measured approach to trade, focusing on targeted restrictions, particularly with regard to China. However, trade tensions are expected to persist, particularly in the technology and energy sectors.

From a fiscal policy perspective, Harris aims to raise taxes on corporations and the wealthy while offering tax breaks to lower-income families. Her platform emphasizes public investment in green infrastructure and social programs, aiming to reduce income inequality. Trump’s fiscal strategy focuses on extending and deepening the 2017 tax cuts, including lowering the corporate tax rate to 15 percent. His approach includes deregulation to spur economic growth, but it could also significantly expand the federal deficit, raising the risk of economic overheating.

Both candidates’ platforms involve substantial public spending, raising concerns about inflation and interest rates. In conditions where population consumption is strong, the increase in deficit spending could lead to an increase in inflation, forcing the Federal Reserve to tighten monetary policy and raise interest rates.

Despite these risks, the US dollar will remain the global reserve currency, ensuring favorable financing conditions for the country, Coface analysts conclude.

Source: www.mediafax.ro