The result of November’s US election will have an impact on key drivers of commodity markets including policy and regulation, geopolitics and climate policy.  In this Blue View opinion piece, Project Blue explores the likely differences between a Trump and Biden White House and what that could mean for critical materials.

Americans will go to the polls on November 5 to decide between Democratic President Joe Biden and former Republican President Donald Trump. At the time of writing, the outcome of this rematch is too close to call, while pollsters seem to agree that the key battlegrounds will be the swing states of Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin. Control of Congress is also an area of uncertainty, but one with big implications – without a clear majority legislative action is curtailed. 

The outcome of the election will of course be significant for the US, and the world, given America's influential role in global politics, economics, culture, and environment:

·      Politically, the outcome could have a huge bearing on international relations, especially with regard to ongoing global conflicts. 

·      Economically, the outcome could impact the dollar, sway global markets, and influence everything from trade patterns to investment trends.  

·    Culturally, the result could impact things as diverse as education and research, business and consumer culture, and technology. 

·      Environmentally, the result could have a large bearing on US environmental policy, which in turn will impact global climate initiatives.  

As all of these areas shape global commodity markets, what follows is an examination of what different election outcomes could mean. Where possible, we try to explore specific impacts on critical materials markets.

Given that both men have occupied the presidency, their policy positions are generally well known. That said, Trump kept his distance from the Republican primaries, staying clear of the debate stage, and as a result, we know less than we might about his latest positions on certain issues. 

Trade and tariffs

Trump’s first term was characterised by hawkish foreign policy towards China, supported by various tariffs covering over US$350Bn worth of imports from China, mostly at the 25% rate.

In May 2024, the White House introduced a string of stringent and symbolic tariffs on Chinese goods worth US$18Bn. The move follows a statutory four-year USTR review and includes:

·      EVs: 25% to 100% in 2024.

·      Lithium-ion EV batteries: 7.5%% to 25% in 2024.

·      Lithium-ion non-EV batteries: 7.5% to 25% in 2026. 

·      Natural graphite and permanent magnets: 0% to 25% in 2026. 

·      Semiconductors: 25% to 50% by 2025.

·      Steel and aluminium products: 0–7.5% to 25% in 2024.

·      Solar cells: 25% to 50% in 2024.

·      Other (select) critical minerals: 0% to 25% in 2024.

In reply, Trump has criticized President Biden for not doing more on Chinese exports sooner while touting tariffs of 60% or higher on all Chinese goods and 10% across-the-board tariffs on goods from all points of origin. Trump has also said that he would consider putting tariffs of 200% on cars made on cars made by Chinese-owned plants in Mexico. 

It will be interesting to see whether one-upmanship in tariffs towards China will become a feature of the campaign. These moves may be economically designed to protect the USA’s green energy sector from cheaper Chinese imports, but they are blatantly populist in nature. On EVs, tariffs are more symbolic than substantial: there are not many Chinese EVs on the roads in the USA and this will (now surely) remain the case. 

Whoever wins in November, the impact of tariffs will be hard felt by many. In the short-to-medium term, higher rates on certain EV components will push prices higher, while in the longer term, US manufacturers may not feel the need to remain as competitive if they feel protected from international competition. 

Economy

A Biden win should signify a continuation of the economic (and macroeconomic) status quo given that he is the incumbent. The prevailing situation is one of a softening economy, and lower interest rates are expected as the year progresses assuming inflation falls.  However, the Federal Reserve’s next moves are difficult to predict and further progress toward the Fed’s 2% target is set to be a lengthy process.  If inflation proves stickier (cost-pushed rather than demand-pulled) than expected the Fed could keep interest rates higher for longer. 

A Trump win would likely result in a similar economic situation although higher tariffs and/or tax cuts could translate into higher inflation.  This could in turn see rate cuts delayed (or even increased in an extreme situation). A more drastic outcome could be observed if rumours that Trump’s allies are drafting proposals that would attempt to erode the Federal Reserve’s independence are correct. Any erosion of the Central Bank’s independence would likely be seen negatively by markets.   

Whoever wins, while data suggests the US economy is in reasonable health (charactered by strong employment data, higher earnings, and strong consumer spending etc.) there are potential issues on the horizon. Consumer spending has held up well in the face of high inflation and highest interest rates because many Americans were spending money saved during the pandemic. However, consumer coffers have evaporated, and credit card purchases are soaring as Americans continue to live behind their means. Sustained high inflation could result in recession if not managed appropriately.

While US domestic consumption and sentiment is a considerable driver for commodities, it is perhaps the US dollar which matters most. 

In April, the dollar hit a 34-year high against key currencies leading former President Trump to comment that the dollar’s new peak would be a disaster for manufacturers. The dollars strength has been caused by a combination of the US economy’s strength vs other major economies, as well as rising inflation and the Federal Reserve’s decision to delay interest rate cuts. Trump, meanwhile, also blamed Biden’s trade policies towards China.

It has been reported that Trump is exploring options to devalue the dollar if he returns to office in November in order to address the trade deficit. If this were to happen, the impact on commodities could be considerable. A weak dollar makes it cheaper for other countries to buy commodities, which leads to an increase in demand and, in turn, (usually) an increase in prices. Conversely, a strong dollar makes commodities more expensive, leading to a decrease in demand in the ROW which, in turn, supresses prices. 

Foreign policy

The Trump and Biden White Houses have been similarly hawkish in their approaches towards China. While both would continue in this vein from 2025, we expect a second Trump term to be more hawkish than a second Biden term. Despite recent harder rhetoric and tariffs, dialogue with Beijing is likely to remain open under Biden with neither side willing to start a full-blown trade war which would be prejudicial to both economies.

A Trump election could be more negative for China, mainly because of the potential for higher tariffs to imposed on Chinese exports. As a result, Chinese growth could be more impacted, which could in turn trigger stimulus measures, possibly fiscal, although high levels of debt would be an issue. China is aware of this potential outcome and economically is diversifying its trade flow by increasing exports while politically keeping public relations strong with Russia. 

With regard to Europe, the election result could have more diverse consequences. Two major points of difference could be over Ukraine and NATO.  Tough campaign rhetoric, aimed at his base, should not be confused for policy – but Trump has made clear his admiration for Vladimir Putin, has voiced concerns over America’s role in Ukraine as has been somewhat dismissive in his attitude toward the European Union. Trump’s intentions surrounding US involvement in NATO are also unclear. Any reduction in US involvement and commitment could prompt a largescale rethinking of European defence strategy.  This is unlikely, however. Trump’s rhetoric is more likely aimed at getting a “better deal” for the US in terms of Europe’s contribution than signalling a fundamental thinking of strategic alliances. 

Should Biden win, we would expect status quo with regard to levels of financial support to Ukraine although much would depend on who controls Congress. Trump meanwhile could seek to pull back on support for Ukraine which could have implications for the conflict’s outcome. It is possible that sanctions on Russia would be lifted more quickly under Trump, which could impact commodities and alleviate supply-side tightness in some markets.

Climate

In his first term, Trump pulled the USA out of the 2015 Paris climate agreement, rolled back environmental regulations, and laid the framework for more oil and gas drilling. His “drill, baby, drill” attitude sees US oil and gas as central to economic security and development and we might expect a second Trump term to see more regulatory and tax changes promoting US oil and gas production, especially in Alaska.

A President Trump would see more of the same, while Trump would probably look to reverse some of the environmental/climate related regulation that the Biden administration has also reversed. Trump has vowed to cancel Biden’s policies for cutting pollution from fossil-fuel-burning power plants, terminate efforts to encourage electric vehicles, and promote oil and gas exploration in the USA.

Trump, who has called the IRA ‘the biggest tax hike in history’, is widely expected to scrap much of the law, although its bi-partisan support may make that tricky (especially if he faces a hostile Congress). Nonetheless, incentives for people to buy electric vehicles, measures to support businesses that install electric-vehicle charging stations and tax credits for solar and wind power, could all be on the chopping block.

Biden’s signature policy piece, the Inflation Reduction Act (IRA), is a far-ranging piece of industrial policy with climate policies embedded within.  It contains more than US$370Bn in tax credits over ten years, offering incentives to companies to make electric vehicles and batteries, and to consumers to buy those vehicles, as well as switch to solar energy and buy things like electric heat pumps to heat and cool their homes. By fixing stricter emissions targets for combustion engines, the Biden administration aims to make most new passenger cars and light trucks sold in the US all-electric or hybrid by 2032. 

Meanwhile, Biden has effectively moved to end the use of coal for power generation. The Environmental Protection Agency (EPA) requires coal plants in the United States to reduce 90% of their greenhouse pollution by 2039. The administration has also tried to curb future development of the oil industry in the US with the smallest offshore oil program in history. It has protected from drilling large parts of Alaska’s arctic. As president, Trump withdrew the US from the Paris agreement, while Biden returned it to the global conversation, pledging to cut US emissions in half this decade, and stop adding greenhouse gases to the atmosphere before 2050.

While the November result could have big impacts on domestic and international climate policy, Project Blue believes in many ways the spirit of the IRA would live on in many areas even if Trump were to regain the white house. 

Ultimately, the IRA is designed to combat China, promote US manufacturing and re-shore and near-shore critical supply chains, manufacturing and infrastructure while boosting supply chain security. With this in mind, its not too different to Trump’s “America First” approach.

Conclusion

A Biden win should mean “more of the same”, while a Trump win could see changes at home and abroad. That said, there may be fewer differences than many think between a Biden and Trump White House with the main contrasts being climate policy and elements of foreign policy. 

The main risk of a Trump win on commodities is an indirect one. Higher inflation (caused by higher tariffs or meddling with the Fed’s independence) could mean higher rates brining about recessionary/stagflation risks which result in lower demand for commodities and lower prices across the board (with the US Dollar being a wild card). 

Since momentum and investment in the US EV supply chain has been strong, it is not expected that Trump would cut the IRA completely, as any move to do so would play directly into China’s hands. Protecting the US big three automakers (GM, Stellantis and Ford) is also a fundamental priority for the US, so reversing the substantial investment and (irreversible) progress they have made into electrification would be unlikely.

What can be expected though are stronger headwinds with EV development in the US. A Trump win could hinder growth in the short to medium-term through curtailment of the EV and manufacturing incentives laid out in the IRA. This would inevitably result in higher EV purchasing costs and a delayed EV adoption curve, leading to greater uncertainty towards US investment, higher inflationary pressure and a less-competitive vehicle market.

This could also result in some more direct risks further upstream. A slowdown on renewables and EVs implies lower consumption of copper, lithium and other battery metals for example. While more protectionism could have impacts for various China-driven commodities (of which there are too many to list) which could push prices up. Any severe move by Trump to dissolve green policy may, therefore, be more limited when considering the detrimental impact that it would have on the US economy long term.