The upcoming U.S. presidential election may have notable implications for the European financial system, notably 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 akin to fundraising and ballot efficiency. Whereas the election’s consequence 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 beneath any situation, there’s a very low probability of a major commerce deal between the EU and the US,” UBS’s report states.
As a substitute, consideration will seemingly deal with potential protectionist measures, notably beneath a Trump administration. His marketing campaign has floated excessive tariff measures, akin to a ten% tariff on all imports, which could possibly be used as leverage in negotiations to cut back the commerce deficit and promote U.S. manufacturing.
A Harris presidency, in distinction, is anticipated to take care of continuity in commerce and protection insurance policies, which may show much less disruptive for European traders.
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 setting for funding.
On protection, European nations are already making ready for a future the place U.S. assist can’t be taken as a right.
The report highlights that “no matter the end result of November’s presidential poll, European nations are already conscious that they should commit extra sources to defending themselves.”
That is notably urgent given the latest will increase in protection spending because of the vitality disaster and the battle in Ukraine. A Trump victory would possibly speed up this want, doubtlessly straining European budgets, whereas a Harris administration may provide extra time to regulate.
“As well as, if Europe had been to divert extra funding to Ukraine to make up for waning US assist, we may see extra strains on funds within the absence of an finish to the battle,” UBS continued.
“Even in nations with comparatively wholesome funds akin to Germany, political pressures are beginning to elevate questions on how prepared and ready Europe is to run larger-than-usual deficits.”
Total, UBS believes that the U.S. election will affect the timing of European protection spending greater than the final word route.
A Trump presidency may speed up the necessity for elevated spending, whereas a Harris presidency might enable for extra gradual changes. Although instant spending may pressure budgets because of Europe’s restricted protection manufacturing, UBS believes long-term financial advantages would possibly come up from enhanced capability and innovation within the sector.
