The United States election is always a massive deal all around the world – and for good reason. Home to the largest economy in the world, the US has a great deal of influence over not only other countries but major global markets too.
Thus, the results of US elections have historically been greatly anticipated well beyond American borders, with both individuals and business owners all around the world predicting and preparing for the results – as much as possible, of course.
The US political landscape has a massive influence on economic policies, international trade relations, investment flows and currency stability, among other things, all of which are absolutely critical components of transatlantic business strategies.
Naturally, different US administrations have varying approaches to everything, from trade agreements and economic partnerships to regulatory frameworks. Thus, it’s no surprise that changes in these things often prompt businesses in the United Kingdom (UK) and Europe to adjust their strategies and operations both in anticipation and in the wake of such changes.
As voting is currently underway in Eastern parts of the US and the rest of the country is preparing to cast their ballots, individuals and business owners around the world are waiting with bated breath to see whether the Democrats or Republicans will emerge victorious.
Most relevantly, however, they’re waiting to see what kind of economic, regulatory and trade policies will be implemented and how those things will affect businesses and economic landscapes abroad.
While we wait and see what happens in 2024, it’s worth having a look back in time at how, in the past, changes implemented by US administrations post-election have prompted UK and European-based companies to adjust operations, generally shaping the business landscape across the Atlantic.
Trade Policies and Transatlantic Trade Agreements
New US administrations tend to revise trade agreements and policies as they come into office which has an effect of export-import dynamics which, in turn, sets the stage for trade negotiations with both the UK and Europe.
Depending on the changes that are made, this tends to mean new opportunities or barriers for business operating on either side of the Atlantic which ends up having a direct impact on industries that are dependent on cross-border trade. Especially industries including technology, agriculture and manufacturing.
Generally speaking, when US administrations go ahead and prioritise free trade, UK and US-based exporters tend to benefit from the improved market access. But, when protectionist measures are implemented, tariffs tend to be raised, restrictions are imposed or regulatory hurdles are increased, forcing businesses in the UK and Europe to either absorb these costs or shift into alternative markets.
In the 1980s, for instance, both the US and the UK embraced free-market policies under Prime Minister Margaret Thatcher and President Ronald Reagan, which spurred investment and trade and resulted in a fairly strong relationship between the two countries. The US became a top destination for British goods and US companies ended up making significant investments in both finance and manufacturing sectors in the UK.
A slightly different example, however, is how the US implemented tariffs on aluminium and steel imports under the Trump administration, which led to European industries becoming reliant on metal exports. Many European companies were subject to higher costs as a result, leading to some seeking alternative suppliers or markets. The EU ended up imposing retaliatory tariffs on American products which had a major influence on transatlantic companies’ involvement in the trade environment.
Cross-Border Flow of Capital and Investment Trends
Depending on the change in administrations, US elections tend to bring shifts in tax codes, fiscal policies and regulatory frameworks which, depending on what those changes are, will make the country either more or less attractive to foreign investors.
Plenty of European and UK businesses invest heavily in US sectors including finance in tech, so they tend to watch these changes very closely. As a result, businesses based in the UK and Europe often end up adjusting their strategic planning and capital allocation accordingly.
For instance, the 1990s saw a massive tech boom under President Bill Clinton that resulted in a huge influx of transatlantic investment from both the UK and Europe. Indeed, important partnerships in tech were established between US and European companies, leading to historical collaborations and innovation across the Atlantic.
During the Bush administration, on the other hand, the world was experiencing the 2008 financial crisis which created huge challenges for cross-border investment, regardless of changing policy. As a result, UK and European companies reduced their investment in US businesses and rather put that money into companies based on their side of the pond, so to speak.
This spurred a great deal of discussion about how to mitigate risks involved in transatlantic agreements in the future.
Volatility in Exchange Rates and Currency Fluctuations
Unsurprisingly, US elections tend to lead to fluctuations of the dollar in the build-up to the election, during voting and immediately after the results are announced. Of course, this affects markets all around the globe.
Different administrations’ economic strategies pertaining to changes in US monetary and fiscal policies tend to result in pretty major shifts in exchange rates which affect both UK and European companies involved in trade with US entities.
That is, a strong dollar can make UK and European exports more attractive to US-based companies, but it makes US imports and investments more expensive for UK and European-based companies. Of course, the opposite is true too – a weak dollar makes US imports and investments cheaper for UK and European companies, while UK and European exports become less attractive to American companies.
During Obama’s first term, for instance, the 2008 election took place at an incredibly uncertain time with regard to economic conditions around the globe. As the markets started to adjust to his economic recovery plan, the dollar became volatile which had a massive impact on European and UK exporters. Companies ended up having to adjust their pricing strategies accordingly in order to stay afloat.
Meanwhile, Trump’s “America First” policies resulted in the dollar strengthening throughout most of his term, which benefitted both UK and European businesses exporting to the US. Essentially, their goods became far more competitive in American markets.
Industry-Specific Regulation Changes
US election results often introduce major changes that are specific to certain industries, and depending on which industries those are, this can have a massive effect on UK and European companies that are active in those industries. Some changes that tend to have significant affects include updates of data privacy requirements, shifts in healthcare policy and changes in environmental standards.
Regulatory changes lead to companies having to adjust products ad manufacturing processes, which, if this is the case, can impact business from start to finish, including investments in research and development as well as pricing strategies and more.
During the Trump administration, UK and European pharmaceutical companies became concerned about an emphasis on reducing drug prices in the US, resulting in companies outside the US having to adjust pricing strategies and more.
Under Biden, however, the economy saw an increased focus on environmental sustainability which impacted the energy and automotive sectors. Certain European companies operating in the renewable energy sector ended up establishing relationships in the US due to Biden’s stark demand for sustainable solutions, which has actually been good for cross-Atlantic collaboration in green tech and the environmental industry more generally.
Investor Confidence and Influence on Financial Markets
One of the biggest ramifications is the effect that US elections have on financial markets and investor confidence. Indeed, this tends to be something that investors adjust before elections have even happened based on anticipated changes in US economic policy that are expected to drive share prices of international companies listed on the US exchange either up or down.
Depending on whether people are expecting economic growth or uncertainty in the wake of election results, UK and European investors tend to increase their holdings in American assets or pull back on American investments respectively.
After Trump was elected in 2016, US market initially rallied as a result of expected corporate tax cuts which was, for all intents and purposes, a good thing for UK and European markets and companies.
After Biden’s 2020 election, on the other hand, predictions were that of relative stability in terms of regulation, which bolstered investor confidence in both the US and Europe. Both UK and European investors were encouraged by the supposed stability in Biden’s policies, especially in terms of sustainable growth, and this prompted an increased in cross-border investments and partnerships, ultimately leading to strong relationships across the transatlantic.
What Will the 2024 US Election Bring?
While we can look back in history books and analyse what’s happened in the past, there’s absolutely no telling what the results of the 2024 election will bring not only for the US, but for the UK, Europe and the rest of the world.
A lot of the time, expectations and anticipation end up being a massive part of the conversation and have a significant impact on what businesses decide to do leading up to and immediately following election result announcements.
So, for now, we’ll speculate, but only within a few days will we know for sure how the UK and European markets are most likely to be affected by the new US administration.
