Friday 15th January 2021
What changes, what remains?
Biden is economically not an anti-Trump
Donald Trump and Joe Biden always differ in style, but the US President-elect does not advocate turning away from the protectionist course. Nevertheless, German companies are expecting radical changes in some areas. Some could benefit from this.
Relations with Europe suffered enormously during the term of office of the outgoing US President Donald Trump – things can only get better under his successor Joe Biden. There is also a lot of trouble with economic relationships. Especially the trade conflicts instigated by Trump with his "America first" policy caused great resentment. After four years of threatening gestures, rumbling and chaos, there is great hope for a new beginning. But is Biden really the longed-for savior?
"A 180-degree turnaround is not to be expected even with the new president," warns expert Hubertus Bardt from the Institute of German Economy in Cologne. Biden will adhere to international rules, threaten less and be more reliable than Trump. But there might not be much change in protectionist trade policy. In fact, it is noticeable that Biden described Trump's "trade wars" as disastrous in the election campaign, but made no promise to withdraw the special tariffs imposed by his predecessor.
With his slogan "America first" Trump had placed a lot of emphasis on giving preference to products made in the USA and supporting domestic industries. Biden uses similar rhetoric. "Our future will be Made in America, it will be a future made by American workers," Biden said recently. He also frequently promises that his policies will create "millions of well-paid and unionized jobs" in the US.
Punitive tariffs on car imports probably off the table
Unlike Trump, Biden wants to attach great importance to the expansion of renewable energies and environmentally friendly technologies in addition to a comprehensive infrastructure program. For the German industry, Trump's punitive tariffs on steel and aluminum from June 2018 were a violent affront. In particular, the fact that Trump justified the move with concerns about national security caused huge outrage. The USA is the largest single market for the export of goods "Made in Germany", so import barriers are of great importance for the German economy, which is dependent on foreign trade. The relationship was also shaken by Trump's threat to impose punitive tariffs on car imports – at least this topic should now be finally off the table.
At the top of Biden's government's trade policy list, however, is not the EU, but China. With no other country or economic bloc, the US fell out so much under Trump. Here Biden has to quickly decide how to proceed with companies such as Huawei or the Tiktok app that were blacklisted by Trump or threatened with bans.
According to analysts, there are a number of common denominators between the EU and the USA on the subject of China, so that without Trump going it alone, we could possibly pull together in the future. So far, Biden has only announced that it will critically review existing tariffs. The hope that it will quickly lower the trade barriers could well be disappointed, the Federation of German Industries warns. The controversial tariffs would not only be supported by the trade unions, but also by many Democrats in Congress.
Reconciliation with the WTO?
The prospects are better for the World Trade Organization [WTO], which the Trump administration plunged into the deepest crisis since it was founded in 1995 by blocking its central organ for the settlement of trade disputes. The WTO is also the scene of a bitter dispute between the EU and the USA over the last 15 years over illegal subsidies for the aircraft manufacturers Airbus and Boeing.
Over the years, the arbitrators of the World Trade Organization identified prohibited state aid on both sides and each approved retaliatory tariffs on goods worth billions of dollars. Even if negotiations to settle the ongoing dispute have been going on behind the scenes for a long time, the signs were not ultimately towards relaxation. Only at the beginning of January did the USA escalate the situation further with new punitive tariffs on products from Germany and France.
The US and Europe, however, are crossed on far more than just trade issues. Another area of conflict that the Biden government will have to deal with quickly is the subject of tech regulation. France's planned digital tax for online giants like Google parent Alphabet or Facebook is just as much a stumbling block as the EU Commission's intention to put the tech giants in their place with comprehensive new rules for digital services and online platforms . In the worst case, this could even threaten the US corporations with being broken up.
Focus on climate policy
Among the areas in which the fastest U-turns are likely to be made under Biden, experts include environmental and climate policy. Here, too, the effects on the economy and companies would be great. One of the first measures that could be taken under Biden, for example, is the withdrawal of a relaxation of emissions regulations decided by Trump's government. That would have a major impact on German car manufacturers such as Volkswagen, Daimler or BMW.
Biden also wants to aggressively counter environmental pollution from oil and gas producers – alternative energies would benefit, which Siemens, for example, expects to do well. The prospect of a large infrastructure investment program under Biden also created a good mood for the outgoing Siemens boss Joe Kaeser. "This offers great opportunities for us in the United States," he said in an interview with Bloomberg TV in November.
It all starts with the Corona crisis
In the coming month, Biden wants to present his specific plans for this. The democrat warns that it is a question of investing “bravely” and “wisely”. It depends on whether America will take on a leadership role again or will be overtaken by others. In a first step, however, after taking office, Biden initially wants to launch a new $ 1.9 trillion stimulus package to deal with the corona crisis. He presented the plans for this on Thursday evening in Wilmington.
The package includes $ 1,400 checks for many citizens, an expansion of unemployment benefits, and large sums of money for vaccinations and corona tests. "The health of our nation is at stake," said Biden. "We cannot afford to do nothing." He depends on Congress to get his plans through. His Democrats will control both chambers of parliament in the future – so it should be easy for Biden. The top of the Democrats in the House and Senate have already pledged their support for the aid package.
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