Economic Weekly: Après Trump, le déluge?

After four years of headline-grabbing stunts, an endless rotating cast of supporting characters, and a chaotic final transition, the Trump era came to an end last week with Joe Biden formally inaugurated as the 46^th US President. The new administration has already hit the ground running, with a flurry of executive actions designed to undo many of the Trump administration’s policies, from ending construction of the much-ballyhooed US-Mexico border wall, to re-entering the Paris Climate Accords and the World Health Organisation. For kiwis who are shellshocked by the wall-to-wall political coverage of the last few years, it might be tempting to think we can all stop thinking about American politics again, but given the United States’ influence over the global economy that’s an unlikely prospect.

Item one on the Biden agenda will be to speed up the US vaccine rollout, which is running ahead of most developed countries, but still a massive logistical challenge. One of the first executive orders signed by the new president has been to invoke the Defence Production Act, empowering the US Federal Government to direct businesses to manufacture materials and equipment needed to fight the pandemic. You can keep track of the vaccine progress in the US – as well as everywhere else – in our Weekly Chart packs.

Further economic stimulus is the other big ticket on the agenda for the new administration, with a USD$1.9 trillion packaged being touted by Biden. Rising hopes for a big package are one reason we saw the yield curve steepen and a decent lift in equities globally towards the end of last year, but there are still a few hurdles to clear given the narrow majority in the Senate held by the Democrats.

Most pertinently for kiwis, it will be worth watching for more clues on the Biden team’s approach to international trade. Free trade advocates will be hoping for a departure from the Trump era, which saw the US-China trade war commence and tariffs whacked on US friend and foe alike.

Yet the new administration is already making protectionist noises, with Biden releasing a ‘Buy American’ plan and new Treasury Secretary Janet Yellen taking a firm tone towards China in her confirmation hearing, so the key difference between this administration may merely be one of degrees. New Zealand managed to weather the trade war with little disruption, with annual exports hitting new highs through the Trump era.  But US-China trade tensions under the Biden administration could follow a different shape, particularly if Biden seeks to enlist allies from elsewhere in the Asia-Pacific in a less disorderly, more multilateral way. So even with Donald Trump out of the White House, we might not have seen the last of the surprises out of the US just yet.