The upcoming U.S. presidential election may have notable implications for the European financial system, significantly within the areas of commerce and protection, UBS mentioned in a report launched Wednesday.
In keeping with the funding financial institution, the race has gained momentum following Kamala Harris’s entry, along with her marketing campaign surpassing Donald Trump’s in key areas equivalent to fundraising and ballot efficiency. Whereas the election’s end result stays unsure, the potential impacts on Europe have gotten clearer.
Commerce is anticipated to be a serious concern for Europe, no matter who wins the White Home.
The U.S. is the European Union’s largest buying and selling companion, and any shift in U.S. commerce coverage may ripple throughout the continent.
“Our expectation is that below any state of affairs, there’s a very low probability of a big commerce deal between the EU and the US,” UBS’s report states.
As an alternative, consideration will possible deal with potential protectionist measures, significantly below a Trump administration. His marketing campaign has floated excessive tariff measures, equivalent to a ten% tariff on all imports, which might be used as leverage in negotiations to scale back the commerce deficit and promote U.S. manufacturing.
A Harris presidency, in distinction, is anticipated to keep up continuity in commerce and protection insurance policies, which may show much less disruptive for European buyers.
UBS means that “a Harris presidency ought to largely characterize continuity and doubtlessly a extra predictable coverage path on protection and commerce.” This stability may mitigate dangers to financial development in Europe, offering a extra favorable atmosphere for funding.
On protection, European nations are already making ready for a future the place U.S. help can’t be taken without any consideration.
The report highlights that “regardless of the result of November’s presidential poll, European international locations are already conscious that they should commit extra assets to defending themselves.”
That is significantly urgent given the current will increase in protection spending as a result of power disaster and the battle in Ukraine. A Trump victory may speed up this want, doubtlessly straining European budgets, whereas a Harris administration may supply extra time to regulate.
“As well as, if Europe had been to divert extra funding to Ukraine to make up for waning US help, we may see extra strains on funds within the absence of an finish to the battle,” UBS continued.
“Even in international locations with comparatively wholesome funds equivalent to Germany, political pressures are beginning to elevate questions on how keen and ready Europe is to run larger-than-usual deficits.”
General, UBS believes that the U.S. election will affect the timing of European protection spending greater than the final word course.
A Trump presidency may speed up the necessity for elevated spending, whereas a Harris presidency might enable for extra gradual changes. Although fast spending may pressure budgets because of Europe’s restricted protection manufacturing, UBS believes long-term financial advantages may come up from enhanced capability and innovation within the sector.
