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Trade, Disputes and November’s Election

Chris Bailey, European Strategist, Raymond James Investment Services Ltd.*

and accountability more deeply into global supranational
organisations, whilst avoiding a generalised trade conflict.
With issues such as a proposed European digital services tax
on large (predominately) US technology names already
causing conflict, you can see why the current crop of Euro-
pean political leaders are keeping their cards close to their
chests. To say Europe awaits the result in November with
great interest would be an understatement.
Before the pandemic hit, November’s US presidential election As for China, it would be simplistic to believe that the rhetor-
was set to be this year’s biggest geopolitical event on the ical flourishes that have characterised interactions with the
minds of all global investors. This deep interest in the out- United States over the last few years is the only level the two
come of the US democratic process is both realistic and countries work with each other at. January’s trade deal
pragmatic. Realism is centred on the continuing deep eco- showed that the two economic superpowers can reach an
nomic, trade and diplomatic ties built up by all major agreement but the challenges to this remains legion.
economic blocs with the United States over the last couple of
centuries. Pragmatism is focused on which way the result Naturally, part of this is the longer-term game of two super-
swings. powers bumping up against each other, but do not think that
China’s preference is simply the presidential candidate who
Given the relatively open nature of European economies, the would be less oppressive on relations with the Middle
question of trade disputes does not sit well with an audience Kingdom on a trade and diplomatic basis. China has econom-
in London, Paris or Berlin. Whilst Europe is currently strug- ically matured from the mercantilist focused country of the
gling with its own internal Brexit challenges, as a region, it is 1990s and early 2000s, which prioritised a benign external
acutely aware of the threat to its own economic prospects environment in order to build wealth and power via a trade
from a distinct falling out. However, it is not as simple as surplus. However, the China of the 2020s is economically
Europe preferring the candidate offering greater external stronger and hence less afraid of a fight. And a single party
trade stability. Europe itself has ambitions beyond its own state which emphasises stability will be even more focused on
regional borders and whilst the region is being aggressively the twin objectives of domestic economic development and a
courted by China, who sees a deeper partnership as making burgeoning external power. There are few better ways when
geographic, diplomatic, and economic sense, there is a grave communicating to a domestic audience about power by out-
suspicion of a country that operates a distinctly different foxing an overtly critical opponent.
political system and with potentially some highly differenti-
ated views on issues such as human rights and local autonomy I would class China’s interest in the upcoming presidential
in Hong Kong. election as effectively feigned indifference. Tactics will adjust
accordingly depending not only on who wins, but how poli-
These tensions cut across Europe’s own regional schism, as cies that emanated out of America evolve.
shown by the far from unified reaction within Europe to the
current administration’s call to prohibit certain Chinese tech- Where the world after the US election becomes particularly
nology infrastructure companies from next generation interesting if the resident of the White House for the next four
telecommunications networks. Expect the UK – newly liber- year presidential term, forges a closer relationship with both
ated from the European Union – to find reasons to make Europe and other influential global powers to push back
agreements with the next US administration more easily and against China on both trade and non-trade matters. Alterna-
quickly than the other major European countries. tively, greater disorder may become more of a norm. Even
though an American electorate will choose the next president,
In short, Europe is looking for the next four years to offer an the pushes and pulls on the winning candidate will be
opportunity to forge a partnership to build both democracy domestic and international in nature.

*An affiliate of Raymond James & Associates, Inc. and Raymond James Financial Services, Inc.

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