Corporate tax policy: while Mr Trump’s corporate tax policies are ostensibly more market-friendly, Mr Biden’s plan may be offset by other growth initiatives

• Mr Biden wants to reverse the Trump administration’s 2017 tax cuts, raising the corporate tax rate from 21% to 28% (while keeping it below the pre-2017 rate of 35%) and creating a minimum 15% tax for corporations earning USD 100 million or more. He also plans to double the tax rate for foreign subsidiaries of US firms. These policies would likely hurt earnings for sectors that benefited the most from Mr Trump’s tax cuts (including financials, consumer staples and utilities) as well as large multinational companies with overseas operations (including technology and healthcare). However, Mr Biden does plan to invest in growth areas such as clean energy and 5G technology. Moreover, the US economy is recovering from recession, so Mr Biden may not make tax hikes an immediate priority – and there is no guarantee they will pass, especially if Congress remains divided.
• Mr Trump wants to maintain the status quo. The corporate tax cuts he implemented in 2017 were designed to be permanent, and he also likely wants to turn the temporary tax cuts for individuals into permanent ones. However, much depends on which party controls the US Congress after the elections – a Democratic Congress would be much less receptive to Mr Trump’s tax proposals.

Energy policy: a Biden presidency could create opportunities for clean energy, while another Trump term would support the existing energy regime

• Mr Biden plans to invest heavily in areas like renewable energy and climate protection. His policy calls for a USD 2 trillion investment in solar, wind and other clean-energy sources, as well as incentives for manufacturers to produce zero-emission electric vehicles and energy-efficient homes.
• Mr Trump’s plan focuses more on traditional energy sources such as oil, natural gas and coal – which account for over 80% of total energy used in the US (vs 10% for renewable energy). He would provide a friendlier tax and regulatory regime for traditional energy, as well as continued support for “fracking” – a drilling technique use to extract oil or natural gas from underground. The Trump administration believes its energy policies have made the US less vulnerable to shocks from the Middle East or OPEC.

US-China trade policy: both candidates would be “tough on China” and aim to strengthen US tech leadership over China

• President Trump has made US-China trade a priority of his administration – often acting unilaterally or via executive order. The two countries did agree on a Phase 1 trade deal on 15 January, but tensions have since resumed over the pandemic and the business practices of Chinese technology firms. In a second term, Mr Trump would likely continue his tough rhetoric and uniliteral approach, perhaps spurring market volatility in the years ahead.
• Mr Biden has also pledged to be “tough on China” but has indicated he prefers building coalitions – bringing US allies, labour groups and environmental organisations to the negotiating table. His administration would likely also view Chinese-led technology firms less favourably; Mr Biden proposes a USD 300 billion investment in US technology spending (including 5G, AI and cybersecurity) to remain competitive with the Chinese (see chart). President Trump would likely favour continued US leadership in technology as well, although he has not confirmed any new policy measures to support this.

Mr Biden proposes spending on climate change, infrastructure and “buy American” support for tech

Key components of Biden’s spending proposal (in USD billions)

Source: Biden for America as at September 2020.