On 20th January 2021, Joseph “Joe” Biden Jr. will become the 46th US president, initiating reforms and policies that pundits forecast will have wide-ranging impact. The American landscape we’ve become familiar with over the past 4 years will undergo a nearly 360-degree transformation.
From tariff wars and tax hikes to climate change and US foreign policy, Biden’s decisions will be watched with bated breath.
The question on everyone’s minds is this: How will the Biden Era affect the world economy?
The taxman cometh
Biden has pledged to raise the corporate tax rate to 28%, higher than the current 21%. He also plans to impose a 15% minimum tax on income to ensure each company pays its dues – but this is lower than what it was before Trump took office.
He also plans to eliminate tax loopholes that allow billion-dollar companies like Amazon to pay zero dollars in federal taxes. We estimate that this could raise federal revenues by $2.5 to 3 trillion over the next decade. This should give Biden enough of a buffer to spend on the infrastructure plans he has outlined many times.
Overall, this should also benefit the world economy. The trend of capital flying out of BRICS countries and the Middle East – among others – because of Trump’s ‘America First’ stance is expected to reverse under Biden. However, one worry is that Biden may struggle to realize his plans without control of the Senate.
Biden is also serious about climate change, promising that America will rejoin the ParisClimate Agreement when he takes over. He plans to increase US carbon emission cuts by 2030 to achieve net zero emissions by 2050. This will be a huge boost for green companies – those working to make the planet a better place – from renewable energy firms and electrical vehicle (EV) manufacturers to plant-based meat companies.
This signals a paradigm shift in value-creating economic forces: outmoded business models will be pushed back to favor innovative strategies positioned to better satisfy customer needs while also benefiting the environment. These new companies will capture market share from legacy firms and increase their share of the pie, creating headroom for sustainable growth.
The era of peace?
The shift in the US’ stance towards China is, doubtless, one of the major legacies of the Trump administration’s foreign policy, alongside a renewed peace process in the Middle East. Under Biden, we expect a deceleration in tension – not just in US-China relations but also US-Europe.
If this happens, it will provide a much-needed peaceful environment for the global economy. Hopefully, the term “trade wars” will become obsolete, and the US and China will reap the benefits of a stronger union. This will benefit not only their respective economies, but also the world as a whole.
We, like everyone else, are biding – or should we say ‘biden’? – our time to see what will unfold.