For five days, the world watched the twists and turns of the US election, which saw Joe Biden eventually become the de facto President elect. Recounts and legal action could yet further delay final confirmation, but a reversal now seems unlikely.

Against this backdrop, our ‘Perspectives on the US Election’ event discussed what the likely result could mean for business, future trade deals, foreign policy, the economy and the bilateral relationship with the UK.

The control of the Senate hangs in the balance and will not now be decided until 5 January due to the need for a run-off for the two seats in Georgia. Currently, the Democrats and Republicans are tied on 48 seats each with four seats left to call. In the event of a tie, the Vice President has the casting vote. The key point here is that the party that controls the Senate has power over the President’s legislative agenda. That means a Republican victory or an evenly split Senate will undoubtedly have implications for the new President’s ability to execute his domestic policy agenda on key issues such as healthcare, climate change and immigration.

It also puts in question the proposed $3 trillion stimulus package and, as a result, businesses could see relative stability in the fiscal and tax position.

However, when it comes to foreign policy and trade, the new President will have more scope to pursue his agenda – although the differences may be more in style than direction.

A Biden presidency could have some impact on the dynamics of the Brexit negotiations. Joe Biden has made clear his concerns that the UK’s no deal position might undermine the Good Friday Agreement in Northern Ireland. It is unlikely that a UK/US trade will be done quickly, but there will be further efforts to improve the UK/US economic relationship in the coming months and a deal in 2022 looks possible.

There are not expected to be major trade liberalisations under a Biden presidency. The last few years have seen the US taking a much harder stance in its trade relationship with China. This has been bipartisan, but the approach is expected to be marginally more constructive going forward.

The election result will have some implications for the economic outlook, but not as game changing as originally thought. Joe Biden pushed a GDP message during his election campaign, but if he’s gridlocked due to the Senate, we could see softer medium- to long-term growth.

The management of the COVID-19 crisis will have the biggest impact on the economic outlook. The US economy saw strong growth in the third quarter, undoing around 80% of the downturn that took hold in the Spring. The biggest concern in the near-term centres around how much worse a second wave and subsequent restrictions could be. The authorities will need to keep the economy going with fiscal policy.

Without the blue wave in the Senate, the prospect of a big infrastructure spending package has been reduced. Less fiscal loosening or less of a boost to infrastructure spending would mean monetary policy having to do the work and low interest rates could be with the US for longer. That would likely mean the economic recovery would continue to be slow.

Many US businesses have broadly supported the specific business-related policies of the Trump administration, such as bringing corporate tax rates more in line with global competitors the Jobs Act and moves to remove regulatory burden from business. 

Joe Biden’s manifesto promised many tax raising initiatives on business to help level the playing field with the average US taxpayer. But plans to raise the corporate tax rate to 28 percent and an increase in Capital Gains Tax to 39.6 percent to eradicate what could be unfair advantages for big businesses could be harder to get through a gridlocked Senate.

With the pandemic still having an impact on the global economy, US businesses will want a period of calm as they look to recovery. In order to get back to growth they will be looking to the President to address key issues such as immigration, visas and air corridors, which are currently hampering their ability to recruit talent. Exactly what the new President will or can do with regards to business related policy changes will depend on the eventual shape the Senate takes – which is still very much in the hands of the voters.

For more insights, watch our Perspectives on the US Election digital event, which is now available on-demand.