The U.S. presidential election is set to take place in November, and the world is closely watching the race between Vice President Kamala Harris and former President Donald Trump. The outcome could have wide-ranging impacts on international relations and economic development. For Hong Kong and the Mainland, changes in U.S. trade policies, tariffs and diplomatic strategies could significantly affect the business environment.
At a roundtable luncheon on 12 September, a panel of distinguished experts, including John Burns, Emeritus Professor, The University of Hong Kong; Benjamin Kostrzewa, Foreign Legal Consultant, Hogan Lovells; and Vivien Lau, Partner, U.S. Tax Consulting Services, PwC Hong Kong, unpacked the latest developments and implications of the American election for businesses in Hong Kong and the Mainland.
Burns started with an overview of the election polls to set the scene. While Harris seems to be leading, “in 2016 and 2020, the polls always underestimated Trump,” he said, pointing out that the swing states matter.
“With slightly fewer than a hundred electoral votes needed to win the presidency, the seven swing states are consequential. They tend to have a higher turnout rate, typically 70%, as the races there are extremely competitive,” he explained. “The results in these states will depend on turnout. The higher turnout groups are older, more educated and richer. Women and white people tend to vote more.”
Kostrzewa said many swing states have been hollowed out due to the trade imbalance between the U.S. and China. “For a long time, we expected a trade relationship where China would be the world factory and the U.S. would consume those goods. It did work out economically with China’s rise into a middle-income country.”
Alongside the strained Sino-U.S. relationship, tensions have also been growing between U.S. producers and the domestic consumer base as the Americans are also significant manufacturers.
As for the election outcome, he said there was a considerable difference between Trump and Harris: “Trump’s instinct is to be isolationist and unilateral while Harris is probably going to continue Biden’s efforts to work through multilateral channels.”
According to Kostrzewa, Trump’s proposed 60% tariff is perhaps the biggest difference as Harris will likely stick to the “small yard, high fence” approach on specific strategic industries and anti-dumping and countervailing duties, in keeping with Biden’s policies.
Analyzing the tax policy agendas proposed by the presidential candidates from a tax perspective, Lau said the election outcome would determine whether the tax provisions Trump introduced in 2018 and due to end in 2025 will either be continued or undergo substantial revision.
“It would be interesting to see which party will get elected and whether the upcoming tax proposals will be passed through a budget reconciliation process, which could drive the direction of how long-term these changes will be and in which areas,” she noted.
The speakers also advised businesses in Hong Kong to keep abreast of changes and explore opportunities in both the Mainland and the U.S. while aligning their actions with business objectives.