Global markets are experiencing significant uncertainty in anticipation of the U.S. presidential elections scheduled for November 5, 2024. It is currently clear that Donald Trump will represent the Republican Party in the election, while Kamala Harris will be the Democratic candidate. Both opponents have different perspectives on the U.S. economy and their respective presidencies will have different influences on foreign markets. Kamala Harris is expected to continue Joe Biden's policies with minor adjustments. Donald Trump and the Republicans have their vision for the economy, which will likely be similar in some respects to his economic policies during his first presidential term. This article examines the potential consequences of either the Democrats or Republicans coming to power and their impact on markets in South and Southeast Asia.
Key directions of Trump's economic policy toward South and Southeast Asia
America First approach
Trump’s return could revive the ‘America First’ policies, focusing on domestic manufacturing and renegotiating trade deals to favour the U.S. This might create tensions in trade relations with Asian countries.
Tariff strategies
Trump might reinstate or increase tariffs on Asian goods, which could lead to trade disputes and affect economic growth in the region.
Bilateral negotiations
A shift towards bilateral trade agreements could emerge, providing some Asian countries with an opportunity to negotiate more favourable terms directly with the U.S.
Trump is a strong supporter of business and understands the ways in which business can develop. Therefore, his first step will likely be to extend tax breaks, which would positively impact the U.S. stock market. In this scenario, a strong dollar would not be advantageous for the U.S., and there would be an acceleration in the policy of reducing interest rates, considering the latest favourable U.S. economic reports. However, there is a downside to this decision. Kar Yong Ang, a financial market analyst for Octa brokerbelieves that ‘extending tax breaks could significantly harm the U.S. budget and exacerbate the already serious deficit problem.’
Trump presents himself as a peacemaker, emphasising that during his presidency, he could resolve the Ukrainian-Russian conflict and the conflict between Israel and the Arab world. Additionally, Trump has promised to reduce energy and electricity costs in the U.S. by increasing domestic fossil fuel production, which would reduce oil imports into the country. Thus, if he succeeds, a decrease in gold and oil prices could be expected.
India
A decline in oil prices could lead to further growth in the Indian stock market. According toKar Yong Ang, India in such a case ‘will have all the conditions for long-term stock market growth. Among emerging markets, India ranks among the leaders in domestic demand.’ India is one of the largest importers of oil and gold. The decrease in the cost of these commodities could give a strong boost to the Indian market.
Indonesia
For Indonesia, a major oil exporter, Trump's arrival could negatively impact revenue from oil exports. The country also actively exports metals and ores, but given Trump's desire to focus economic policy on domestic production and extraction, a decrease in Indonesian exports may be expected. Indonesia is the world's largest producer of nickel, which can be used for producing batteries for electric vehicles. However, Trump plans to repeal much of the $369 billion Inflation Reduction Act, the largest climate measure in U.S. history, which includes stimulating clean energy projects and purchasing electric vehicles.
Malaysia
Malaysia is likely to be less affected, but the impact will still be felt, as the U.S. is a top LNG exporter, competing directly with Malaysia.
Key directions of Kamala Harris's economic policy toward South and Southeast Asia
Continuation of Biden’s policies
If Kamala Harris wins, we can expect a continuation of Biden's economic policies, which focus on strengthening international alliances and addressing climate change. This may result in stable trade relations and investment in clean energy projects in South and Southeast Asia.
Focus on human rights
Harris may prioritise human rights issues, which could affect diplomatic relations with countries that have been criticised for their poor human rights records. This could lead to increased diplomatic pressure on some Asian nations.
Climate initiatives
Harris’s administration would likely support international climate agreements, potentially leading to increased collaboration on sustainable development projects in Asia.
Harris is also expected to continue the policy currently led by Joe Biden.
Key elements of the economic policy toward South and Southeast Asia would include re-engaging in multilateral trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), to strengthen economic ties with the countries of South and Southeast Asia. A second focus is on investments in renewable energy projects and sustainable infrastructure, encouraging collaboration on climate change initiatives to help South and Southeast Asian countries transition to cleaner energy sources. Another important element is supporting educational programs and workforce development initiatives to enhance skills and innovation. It should also be noted that by continuing the course of the current president, Harris has not indicated any commitment to promoting the resolution of global conflicts. In this case, further increases in the prices of natural resources and gold can be expected.
India
Relations between the current government of India and the United States cannot be described as pragmatic. India drives its economy based on hard calculations rather than the requests of the U.S. president. By purchasing cheap energy sources, India is developing its domestic market and gaining advantages over other countries. With Harris coming to power, India will remain in the same position as it is now. However, the rise in oil prices will not allow the country to significantly outpace its competitors. It can also be noted that the transition to "green technologies" promoted by Harris will not happen immediately, and the country will lose its advantages over others.
Indonesia
Currently, the United States is an important trading partner for Indonesia, and these relations may continue to develop with Harris's arrival. The countries have well-established trade contacts, and the current U.S. government sees Indonesia as a vital partner and exporter of natural resources. With Harris's presidency, further strengthening of relations between the countries can be expected.
Malaysia
If Harris comes to power, Malaysia will continue its current policy. The working relationship between the countries is complex but pragmatic. Malaysia does not want to be drawn into the competition between the U.S. and China. Malaysia also openly opposes AUKUS (Trilateral security partnership between Australia, the United Kingdom, and the United States), arguing that the agreement threatens regional peace and stability. Thus, the country will neither lose nor gain from the continuation of power in the hands of the Democrats.
Economic impact and market reactions
● Currency volatility: uncertainty regarding the election outcome could lead to fluctuations in currency markets, impacting the value of Asian currencies against the U.S. dollar.
● Investment flows: unvestors may adopt a cautious approach, waiting for election results before making significant investments in Asian markets.
● Trade dynamics: depending on the election outcome, changes in trade policies could either open up new opportunities or create challenges for exports from South and Southeast Asia.
Summary
● Trump's presidency would likely encourage economic growth through tax cuts and deregulation, which could benefit stock markets but weaken the dollar. Cryptocurrencies might gain from a more relaxed regulatory stance.
● Harris's presidency would focus on environmental policies and support for green industries, potentially increasing commodity prices due to regulatory impacts on fossil fuels and encouraging innovation in renewable energy sectors. Global economic challenges and geopolitical tensions could present risks.
The U.S. presidential elections will likely have substantial implications for global markets, particularly in South and Southeast Asia. Investors and policymakers in the region will be closely monitoring the election developments to understand how the future U.S. administration might impact their economic strategies and international trade relations.
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