The 2024 US election is marked, perhaps more than anything else, by uncertainty. Donald Trump and Kamala Harris represent such different ideologies, policies and political personas that the election appears to us as a sharply diverging fork in the political road. Without downplaying the immense difference between the candidates, American political and diplomatic history is a story of continuity amid change. From outside the United States, are these candidates really so different? And what could be the global economic effects of, to invoke Thai folk wisdom, ‘same same, but different?’ 

Keep America Hegemonic (Still) 

Donald Trump is the peacetime president who ends wars and looks for smart deals. Or he’s the Fascist in Chief who will destroy America’s democratic institutions. It depends on whom you ask. 

It’s harder to dispute that Trump is unpredictable and likes to talk tough. While he has said he’d like to find a deal to end the Russia-Ukraine war, Trump is on the record saying that China has “ripped off the United States like no one has ever done before”. 

Indeed, General Mark Milley, the former Chairman of the Joint Chiefs of Staff, once had to explain himself after reports that he had alleged conducted secret phone calls with China to reassure them President Trump wasn’t going to do anything rash. 

Kamala Harris hasn’t vowed to Make America Great Again. However, the Biden administration has taken concrete action explicitly to “protect American workers and businesses from China’s unfair trade practices.” It’s reasonable to believe Harris will continue Biden-era industrial strategy to ostensibly give America a competitive edge over China.  

In contrast to Trump, Harris has vowed to stay committed to NATO and Ukraine’s war effort. 

All the while, the military top brass keep reiterating the need to increase US defence spending to keep up with its rivals.  

There is one paradoxical outcome to consider, however. Could a Trump win ultimately be good for European defence? A combination of Trump’s proposed tariffs, a reluctance to support the Ukrainian war effort, and apparent coolness to NATO could see a revitalisation of Europe’s defence industry.  

Dollar dominance forever? 

We’ve previously discussed how both Trump and Harris could implement policies that would lead to a stronger dollar. When the dollar increases in value, other countries may have to take defensive action to protect their currencies, such as increasing interest rates. 

But what if these countries could circumvent the issue of dollar strength altogether? The US dollar is the world’s reserve currency, and most trade is denominated in USD. 

But not everyone sees this as an ideal state of affairs. For instance, members of the BRICS group of countries of mooted the idea of a BRICS currency. 

It’s not just a question of pure economics. In our post on the geopolitics of gold, we looked at how some central bank gold purchases are driven, at least in part, by the fear of sanctions. 

In order to attempt to bypass US domination of the global financial system, countries under US sanction – such as Russia and Iran – are pursuing alternative global payment systems.   

Alternative payment infrastructure, combined with experiment in different currencies for major trade deals (such as paying for oil in ‘petroyuans’ instead of dollars). Are China, Saudi Arabia, Russia and other states already envisioning a multipolar world? 

Given that both Harris and Trump will plausibly follow the protectionist path set by Trump himself and then the Biden administration, we are likely to see more urgency and energy in the conversation about eroding dollar dominance. Whether all the talk will result in an actual diminution of America’s exorbitant privilege is another matter altogether.  

Trump Trade or Harris Hedge? 

Despite many surface differences, whoever becomes president of the United States will be expected (with the – sometimes invisible – guiding hand of the institutions of state) to pursue the national strategic interest.  

No American president is likely to tolerate a serious challenge to US military or economic dominance. 

That doesn’t mean there won’t be significant differences in terms of policy and implementation, especially regarding taxation, trade, climate action and energy. 

For more detailed insight on how the US election is likely to affect markets, check out the US Election preview episode of the Overleveraged Podcast. 

Each week, Overleveraged brings you fresh insight and analysis into markets, macro, geopolitics and more. Catch it wherever you listen to your podcasts.  

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