The Special Relationship: What a Biden Presidency means for the US and the UK
President-elect Joe Biden is due to be inaugurated on the 20th January 2021 outside the US Capitol in Washington, D.C. Given the “special relationship” between the US and the UK, it is important to consider how a Biden presidency may affect us and our future relationship with our friends from across the pond.
Getting you up to speed:
According to the S&P 500 Index, which measures the performance of 500 of the largest publicly traded companies in the US, the stock market performed well during Trump’s presidency. Promises of huge tax cuts and financial deregulation saw stocks rally with a 5% surge within a month of Trump’s inauguration. Since then, the S&P 500 climbed by over 50%, a significant increase driven partially by an exceptionally strong performance in the technology sector.
Unlike Trump, who inherited a strong economy from Obama in January 2017, Biden faces the insurmountable challenge of repairing an economy crippled by a public health crisis. The coronavirus has had devastating knock-on effects in the US, such as record-high unemployment and the demise of over 100,000 small businesses. Political uncertainties have also contributed to the stock market’s volatility, with stocks reacting to Trump’s claims of electoral fraud and his second impeachment in just over a year. This month’s storming of the Capitol, resulting in the deaths of four republicans and one police officer, acts as a deadly reminder of the civil unrest rippling across the country. Needless to say, investors have been kept on their toes over recent months.
Predictions – the US:
So, what can we expect when Biden becomes president? His manifesto proposals to raise corporation and personal income taxes, and to increase public spending on education, healthcare and decarbonisation, contrast significantly to Trump’s economic policies. However, many remain hopeful that the US economy will bounce back faster under a Biden presidency when priorities shift towards controlling the spread of the coronavirus. Biden has promised a hands-on approach to tackling the pandemic, having already committed to the administration of 100 million vaccines nationwide and a push for all Americans to wear masks during the first 100 days of his term. A new stimulus package is also on the horizon, with reports surfacing of a $1.9 trillion relief bill aimed at bolstering the US economy and jump-starting it back into action.
Predictions – the UK:
But how will the incoming administration impact the UK? Prime Minister Boris Johnson speaks positively of his relationship with Biden, after congratulating him on his victory over Trump. Johnson reported having an “excellent conversation” with the President-elect concerning “all the things that have traditionally united” the two countries. This certainly bodes well for any future trade deal between the US and the UK, but it does follow a series of discouraging comments made by Biden and his concerns regarding Brexit and the Irish border. One comment is particularly troubling, with Biden tweeting last September that, “Any trade deal between the US and UK must be contingent upon respect for the [Good Friday] Agreement and preventing the return of a hard border”.
That being said, the change in leadership may have come at an opportune time for the UK, now that our MPs have publicly criticised Trump’s role in the events of January 6th. Despite remaining fairly tight-lipped in the past, Johnson has “unreservedly condemn[ed]” the President’s actions and Labour leader, Sir Keir Starmer, described the riots as a “direct attack” on democracy. Tensions appear to be high as the UK distances itself from Trump in the days leading up to Biden’s inauguration.
Regardless of whether you support the welcoming of a new President into the Oval Office, the likely effects of a change in dynamic between the UK and its most powerful ally should not be underplayed. Any changes made to the US’ economic and foreign trade policies will be felt across the world.
It is with great relief in times such as these that solicitors cannot provide financial advice. Nevertheless, our Wealth Management Team often provide structural advice to private individuals and business owners who might be looking to undertake tax or other estate planning activities. There is a considerable overlap between estate planning and financial advice, and we would not only recommend seeking both legal and financial advice concurrently but are also well accustomed to working closely with financial advisors to take a joined up approach to your personal affairs.
If you would like to discuss your affairs or need assistance with wealth management and tax planning, please do not hesitate to contact any member of our Wealth Management and Taxation Team.