It has been seven months since 20 January 2021, when President Joe Biden was sworn in while former president Donald Trump stomped back to Florida, adamantly protesting his defeat in the November election. The media circus and concerning protests may have diminished since January 2021, but the scrutiny over the US’s ongoing polarised politics continues.
So, what can be gleaned from Biden’s first seven months in the White House and how does it stack up against Trump’s reign? Investment Monitor spoke with political and economic experts to investigate Biden’s impact so far and whether a Trumpless country really is better off.
How Biden inherited a pandemic and a country divided
Throughout 2020 and 2021, the Covid-19 pandemic has dominated the global economy, and Biden’s presidency has had to contend with this. Even before the electoral vote in November 2020, it was clear that Covid-19 was shining an unforgiving spotlight on Trump, and his perceived inability to handle the pandemic in an effective manner proved crucial to his chances of re-election.
In September 2020, in the midst of a pandemic, the first presidential debate between Biden and Trump took place, and it was dominated by a face-off over the US’s handling of Covid. When asked to address Trump’s performance during the pandemic, Biden gave stark statistics, highlighting that the approximate 200,000 US Covid deaths (at the time of the debate) meant that the US was shouldering 20% of global Covid deaths at that time, despite the US holding just 4% of the world’s population.
As of 10 August 2021, the US Covid death count has risen to approximately 614,000, according to the Centers for Disease Control and Prevention Covid Data Tracker. On Biden’s inauguration day, the US Covid death count was approximately 437,500. The downward trend in Covid deaths began on 13 January, and then the rate of death continued to considerably slow after Biden took office.
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Of course, number tracking aside, Covid-19 also presented numerous economic challenges. Dr Alexis Crow, head of geopolitical risk at PwC, explains that Biden prioritised people over economy in his initial handling of Covid-19.
“Having assumed the presidency in the middle of a spike in Covid-19 cases across the US, Biden designated relief as a clear priority, prior to implementing measures for economic recovery," she says. "Also consistent with his campaign trail promises, Biden has pursued an inclusive economic policy, to help households whose livelihoods have been exacerbated by the Covid-19 crisis.”
Upon entering the White House in January, Biden was quick to report to the media that vaccine distribution was in "worse shape than we anticipated". Furthermore, a number of high-level White House officials such as Chief of Staff Ron Klain and adviser Cedric Richmond reported that Biden’s White House had been given no plan or blueprint to follow by Trump’s administration.
Biden targets reversing Trump policies
If Covid-19 was to be a baptism by fire, Biden came into office with alacrity. On his first and second day as president, Biden had put forward one proclamation, three memos, stopped the US’s withdrawal from the World Health Organisation (WHO) and had actioned ten executive orders around Covid-19. Two of these were direct reversals of Trump’s policy.
In fact, Covid-19 has seen the highest number of executive actions out of a plethora of priority issues in the White House. More recently, according to CNBC, Biden’s approval rating of his handling of Covid-19 has dropped from 62% in April 2021 to 53% in August 2021. Despite this decrease, Biden’s overall job approval rating was sitting at 48% in August 2021, which is higher than Trump’s approval ratings ever were.
As we segue from relief to recovery, it will be interesting to see which measures coming out of the various fiscal stimulus and relief packages will actually be long-lasting. Dr Alexis Crow, PwC
With vaccinations steadily rolling out across the US population, Biden has been turning his attention to the economic fallout.
Duncan Edwards, chief executive of C-suite networking group BritishAmerican Business, highlights that Trump put the economic recovery wheels in motion during his presidency. “Throughout 2020, the US government provided enormous financial stimulus to businesses, municipalities and directly to consumers," he says. "In the first eight months of the Biden administration, this Covid-related stimulus has continued with the $1.9trn stimulus bill, the American Rescue Plan Act, signed on March 11.”
Whilst Biden continues to strategise around stimulating the economy, Edwards adds: “We have no way of knowing what a Trump administration would have done regarding further stimulus had it won the election.”
Crow muses on whether these relief and stimulus strategies could stretch further than Covid-19 to address long-term issues for the US. “As we segue from relief to recovery, it will be interesting to see which measures coming out of the various fiscal stimulus and relief packages will actually be long-lasting, and therefore addressing structural inequalities such as affordable childcare and housing, rather than just targeted relief from the ongoing pandemic,” she says.
As Biden navigates the country's way out of a pandemic, what can be garnered about his intentions for the US economy? How will Biden keep his promises to the deprived while building a robust and lucrative business environment among the rubble of a post-Covid market?
Biden’s $3trn plan
Biden’s approach to federal spending is tenacious. His investment strategy spanning infrastructure, education, healthcare, climate change and more would see federal spending at its highest sustained level since the Second World War.
A significant part of Biden’s strategy is improving infrastructure. Biden’s infrastructure investment bill, which was passed by the US Senate in August 2021, demonstrated rare agreement between Republicans and Democrats with a 69-30 vote in favour of the bill.
The investment in infrastructure was way overdue. It is something that Trump talked about, but it never happened. Dennis J Donovan, Wadley Donovan Gutshaw Consulting
Senate Minority Leader Mitch McConnell said at the passing of the bill that the deal proved that “both sides of the political aisle can still come together around common sense solutions”.
Dennis J Donovan, principal at advisory firm Wadley Donovan Gutshaw Consulting, welcomes this development, saying: “The investment in infrastructure was way overdue. It is something that Trump talked about, but it never happened. This is really needed.”
The infrastructure bill, which will see hundreds of billions of dollars spent on upgrading the US's transport systems, is just one branch of Biden’s spending strategy. Biden’s overall budget request would see total spending rise to $8.2trn by 2031, with a deficit in excess of $1.3trn running throughout the next decade.
This strategy forms part of a two-pronged agenda to not only upgrade the US's infrastructure, but to bolster the country’s social safety net as detailed in his American Jobs and American Families plans.
What about the debt?
Biden inherited substantial debt and deficit from the Trump administration. Despite promises to reduce the national debt, Trump, the self-proclaimed ‘king of debt’, instigated tax cuts that caused an expansive gap – with the national debt rising by almost $7.8trn – creating the third-biggest deficit increase of any presidential administration.
Unlike Trump, Biden has raised taxes in a move that Donovan says is typical for Democrats. He believes that a more balanced approach would work better for investors: “They have got to meet somewhere in the middle. This proposed increase of payroll tax on [earnings of more than] $400,000 – 12.4% – is misguided and should never be passed. That is unnecessarily taking money from people who have earned it.”
For such a rigorous spending plan though, Edwards believes that tax rises are inevitable if there is to be meaningful progress on long-term issues facing the US. “The ambition for this administration is to increase federal spending across a range of initiatives and to pay for much of this by increasing corporate income taxes from 21% to 28% and to increase personal income tax for everyone earning more than $400,000 per year by increasing the rates of income, payroll and capital gains taxes," he says. "None of this has yet happened and the next few months will be crucial.”
The American factory
Alongside improvements to infrastructure, Biden is also championing a robust industrial policy for the US. Like Trump before him, Biden is embracing a ‘buy America’ ideology.
Crow explains the impact this has had on foreign direct investment (FDI).
“In terms of similarities [between Biden and Trump], even prior to the pandemic, both administrations have in common a focus on ‘buy American’, with policies designed towards US procurement of US goods and services," she says. "Accordingly, multinational corporations from across the globe have stepped up their FDI to the US and bolstered their current manufacturing and employment bases, both during Trump’s presidency as well as in the initial months of the Biden administration.”
When it comes to bolstering the US manufacturing sector and its supply chains, there are a number of long-standing issues to be addressed. First, the US suffers from a skills gap, of which Donovan says: “Companies are going to require more automation and technology, because you have to reduce the labour content, and that means a higher skill level." He adds that finding locations that cater to a company's needs for not just physical infrastructure but also these ever-changing labour requirements will be a challenge.
As part of his $2.3tn infrastructure plan, Biden has proposed $100bn for workforce development programmes for underserved groups and high school students. Alongside this he has proposed a $40bn investment into a dislocated workers programme and a further $12bn into more general workforce development.
In contrast, Trump’s administration launched it’s ‘Find Something New’ campaign, which saw Ivanka Trump touting that there was “more than one path to a new career”. This campaign was widely criticised on social media, with many users questioning whether the daughter of a multi-millionaire was the right person to deliver such a message.
Biden's tech challenge
Alongside the skills gap, another challenge that Biden is facing is the requirements of advanced technology. His infrastructure strategy proposes sizable investments in broadband expansion ($100bn), electric vehicles ($174bn), technology research and development ($180bn) and a new office designed to monitor supply chains ($100bn).
While many had hoped for a new chapter with the Biden administration, thus far, Biden appears keen to continue the decoupling process [with China]. Dr Sultan Salem, University of Birmingham
There is also a proposed $300m investment in critical technology, of which Donovan says: “[This] will create a lot of jobs and jump-start our business start-ups and business expansion in clean energy, electric vehicle battery technologies and artificial intelligence. That is a good thing.”
Biden is clearly focused upon investing in the US's industrial policy, particularly when it comes to technology. In comparison, Trump had unveiled plans in August 2020 for a $1bn investment designed to "maintain US dominance as a global tech leader". This investment was designed to support research in quantum computing and artificial intelligence.
However, Trump’s $1bn proposal is tiny when compared with Biden’s colossal spending plans. Biden will now, however, face the challenge of balancing large investments to address long-standing problems and the opposition that comes with any raising of taxes.
Another area that will have a huge impact upon the US's industrial policy is the ongoing tension with China. On this matter, Dr Sultan Salem of the department of economics at the University of Birmingham in the UK says: “Trump incentivised US multinational companies to move out of China. As such, the US outflow of FDI to China declined. While many had hoped for a new chapter with the Biden administration, thus far, Biden appears keen to continue the decoupling process."
“In terms of the manufacturing sector, China seems to be losing out to its neighbouring countries, such as Vietnam and Indonesia. However, in terms of other sectors, particularly technology, companies from other developed economies are keen to invest in China and fill the void left by multinational firms from the US and other G7 countries.”
Of course, the relationship between US and China covers more than just industrial policy, so how exactly do Biden and Trump’s approaches differ?
Biden’s approach to China is both old and new
A lot has been said in recent months of the similarities between Trump and Biden in terms of foreign policy. In short: while it seems that the US’s rhetoric has changed under Biden, the substance has not.
This seems particularly true when it comes to China. For example, Biden has not revoked Trump’s spree of tariffs, as the below chart shows.
“Although the tone might be less inflammatory, the Biden administration has clearly continued a policy of suspicion over China, and continues to voice concern over the ‘imbalanced’ economic relationship between the two countries,” says Crow at PwC.
A 'strategic competition' with China, as practised by Trump, remains the guiding principle. However, within this framework, Biden appears to want to avoid knee-jerk tariffs, for example, and adopt less overtly aggressive tactics. Indeed, the new administration has not issued any new tariffs on China.
Although the tone might be less inflammatory, the Biden administration has clearly continued a policy of suspicion over China. Dr Alexis Crow
Biden’s China approach is perhaps best summarised by US Secretary of State Antony Blinken’s statement that the US must be “competitive when it should be, collaborative when it can be, and adversarial when it must be”.
While Trump’s era was defined by isolationism, Biden has already reignited the multilateralism and collaborative spirit of yore, such as engaging in shuttle diplomacy with its allies around the Asia-Pacific region (most notably through a potential digital trade agreement).
“These efforts at regional cohesion mark a departure from the previous administration, but also have evinced a greater strain on the relationship between Washington and Beijing, with Beijing’s warnings to the US of creating an ‘encirclement’ around China,” says Crow.
“The courting of ties with allies across the Indo-Pacific region is likely to create a more welcoming environment for inbound FDI into the US from countries such as Japan – and indeed we have seen evidence in this.”
Meanwhile, Biden's continued confrontational approach towards China will impact FDI flows between the two superpowers in the coming years. “The Biden administration is escalating the [slowdown in US companies investing in China] by seemingly going back on the 'One China' policy and landing military jets in Taiwan. In short, Biden’s policies will further polarise global FDI,” says Salem.
A better understanding of Biden’s future China approach will be elucidated this autumn with the release of the White House’s much-anticipated US-China strategy, which spans diplomatic, security, trade and tech policy.
It is worth remembering that, in the immediate aftermath of his election victory, Biden’s focus has been on domestic issues, namely dealing with Covid-19, which has given him a window to push forward a transformative agenda. This explains why the president has put foreign policy on the backburner and, beyond the all-important China problem, has been relatively quiet on topics such as Russia and the Middle East.
A restoration of ties with old allies?
For most of Europe, the election of Biden came as a huge relief given his commitments to maintaining the US's strong alliances with the continent. Indeed, Biden rapidly rejoined the Paris Agreement and WHO, made the US a member of the Covax vaccine programme, rejoined the UN Human Rights Council, and underlined the US’s commitment to Nato.
“Biden made it clear throughout his campaign that he would pursue a policy of healing transatlantic ties," says Crow. "This has manifested and borne fruit with the cessation of the tariffs related to the dispute on subsidies for aviation and is underpinned by working groups such as the EU-US Trade Technology Council.
While the Americans and its East Asian allies – Japan and to a lesser extent South Korea – seem set to decouple with China, the situation is decidedly more mixed with Europe and other Western countries. Dr Sultan Salem
“Biden’s policies on transatlantic cohesion stand at odds from the previous administration. Indeed, in light of increased tariffs imposed on Europe, the EU actually deepened trade ties with China, and stepped up export capacity to the mainland. [This new approach] will likely foster a more welcoming environment for FDI [to the US] from European countries such as Germany and the Netherlands.”
The US-China struggle has put the EU in a very awkward position, given that the bloc’s economic health is dependent on strong export performance – and China is now its main export market. This has already led to friction between the US and EU over the latter’s increased economic relations with China, namely through the Comprehensive Agreement on Investment. Simultaneously, the EU continues to stand by the US in acknowledging the global threat posed by Beijing.
“While the Americans and its East Asian allies – Japan and to a lesser extent South Korea – seem set to decouple with China, the situation is decidedly more mixed with Europe and other Western countries,” says Salem.
When it comes to the environment, however, the US and the EU have never been more aligned.
“Biden’s campaign trail commitments to accelerate the energy transition in the US, to move the country towards a target of net zero by no later than 2050, and to rejoin the global stage in leadership on climate change mitigation, stand at odds with Trump’s policies," says Crow. "Biden’s first few days in office resulted in several executive orders which supported this environmental agenda, such as calling for a moratorium on drilling of oil in federal lands.”
Biden restoring calm to the US's FDI markets
Biden’s departure from Trump’s unpredictable and disruptive modus operandi has been a relief for foreign investors.
“It has been encouraging to see Biden reaffirm the value of FDI to the US's economy – first addressing the SelectUSA Investment Summit in June and then issuing an open investment policy statement days later,” says Nancy McLernon, president and CEO of the Global Business Alliance, a trade association representing the interests of foreign investors in the US.
“And throughout the administration, we have seen key cabinet officials underscore the importance of working with our country's friends and allies to confront the challenges before us. All of those actions are a welcome change from a more isolationist approach emanating from Washington during the previous four years. That said, it is critical that the Biden administration’s multilateral message guides its policy implementation moving forward."
Although FDI into the US did not majorly decrease under Trump, it was deterred by fears that non-US companies would be discriminated against. The era of Biden, therefore, is expected to prompt an increase in foreign investment.
A big impact of Biden on FDI concerns the environment and renewable energy. Trump’s solar tariffs and his policies regarding methane standards were a major barrier to foreign investment. Meanwhile, huge sums of capital have been waiting to invest in infrastructure, meaning Biden’s plans here have plenty of support.
Although Trump’s domestic policies (especially the tax related ones) may have benefitted large US multinationals, his overall impact on the world of FDI was detrimental – and catastrophic for the battle against climate change. Biden, by contrast, has brought some much-needed sense and sensibility.
Although Biden has upheld some of Trump's foreign policy legacies, especially with regards to China, he has ushered in a return to the norms of multilateralism. His focus, however, has been on national affairs. In this, Biden has repealed much of Trump's handiwork and taken bold, new action with regards to Covid-19, taxes and infrastructure spending – to name but a few.