Whether Trump or Harris: things are getting more difficult for Swiss companies
Published: Monday, Nov 4th 2024, 11:50
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No matter who wins the US presidential election: Swiss companies operating in the US will have to contend with increased protectionism. However, Kamala Harris is likely to pursue a more predictable policy than her opponent Donald Trump. Experts agree on this.
In the run-up to tomorrow's US presidential election, the waters are running high. There is much speculation about the country's future economic policy. The outcome of the election is also of great interest to local companies, as the USA is Switzerland's second most important trading partner after Germany.
One thing is clear: protectionism is the favored instrument alongside extensive subsidies, says Commerzbank economist Christoph Balz. If both Trump and Harris win, the production of important goods will probably be relocated back to America.
Harris' course is more predictable
However, Cédric Tille, Professor of International Economics at the Graduate Institute of International and Development Studies (IHEID) in Geneva, sees a fundamental difference between the two candidates: "The Democratic camp also represents the interests of the USA, but in a fairly predictable and professional manner," he says.
In Tille's eyes, however, the Trump camp's proposals do not give the impression that they have an overview of the big picture. They are more like slogans. Such an environment of uncertainty is "very tricky for companies that need to plan investments and look to the future".
In order to consider the impact of the elections on Swiss companies, it is necessary to think in terms of different scenarios. In addition to the president, the members of the House of Representatives and a third of the senators will also be elected. Depending on the outcome, the consequences will be very different.
The new president has the greatest power in a so-called "clean sweep" if the presidential party also achieves a majority in both chambers of Congress. "A clean sweep gives the new government the best chance of implementing its legislative agenda," says Jeremy Richardson from the bank RBC.
Higher tariffs with Trump...
For Till Budelmann, CIO of Bergos Privatbank, a "Republican sweep" is currently the most likely scenario. After all, it is fairly certain that the Republicans will win the majority in the Senate. And in the House of Representatives, the new incumbent will probably "pull along" some MPs and thus have the majority of the chamber behind him. "With such a mandate, Trump is likely to feel emboldened to impose high tariffs. That would put a strain on the emerging markets and Europe," he says.
Trump wants to introduce a basic tariff of 10 percent for almost all imported goods. According to Commerzbank economist Balz, this would mean the highest tariffs since the 1930s. "This could increase costs for Swiss companies and make their products less competitive on the US market," says the Swiss-US Chamber of Commerce.
According to Balz, Trump hopes to be able to maintain the income tax cuts introduced during his first presidency thanks to higher customs revenue. These would expire at the beginning of 2026. He also wants to use the additional revenue to finance the planned reduction in corporation tax (from 21% to 15%) for companies that manufacture their products in America.
...and higher taxes at Harris
Harris, on the other hand, is more focused on tax increases and regulation, according to Rahul Sahgal, Director of the Swiss-US Chamber of Commerce. In contrast to Trump, she wants to increase the corporate tax rate (from 21% to 28%). "An increase in corporate tax would have a direct negative impact on corporate profits," says John Plassard from Mirabaud.
However, she would only be able to achieve this in the event of a "Democratic sweep". And most experts consider this to be a rather unlikely scenario.
General tariff increases on a grand scale, on the other hand, are not on her agenda - although, unlike tax increases, these could probably be pushed through without a majority in Congress. "A full-blown tariff conflict with the EU, which would be a likely consequence of implementing Trump's plans, is not to be expected from her," says Balz.
For Swiss companies, "both approaches pose a problem", according to the Swiss-US Chamber of Commerce.
The export promotion organization Switzerland Global Entreprise also notes that "Swiss companies are experiencing a certain degree of uncertainty and a wait-and-see attitude with regard to the election". Certain projects are being postponed from the last quarter of 2024 to the first quarter of 2025 in order to have more certainty.
Less uncertainty with a mixed outcome
If the outcome of the election for Congress and the presidency is different, experts expect fewer changes to the law and therefore less uncertainty. This would be positive for companies doing business in the USA.
What companies also need to be prepared for is that there could be some noise after the election, as there was after Trump's election four years ago. Trump is already trying to convince his supporters again that he was only prevented from winning by "fraud". This behavior by the ex-president led to the storming of the Capitol four years ago. If such scenes were to occur again, this could also cause uncertainty for companies, at least in the short term.
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