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A new US administration brings more certainty for business | Analyst Picks| RiskMap 2021

USA

A new US administration brings more certainty for business 

Jonathan Wood | Director

The US will enter a new administration in 2021, but not necessarily a new era.    

COVID-19 will still dominate business risks for months as vaccine distribution gets underway, with no ‘new normal’ before mid-year. In addition to the economic fallout of a historic recession, companies will grapple with the structural shift to remote working, limits on international and domestic travel, and deep labour and consumer market scars.  

COVID-19 and the economy will also dominate President Joe Biden’s agenda, pushing many ambitions for transformative change beyond 2021. A more cohesive, coherent federal approach to the pandemic will be a welcome change, but the administration’s proverbial first 100 days will still be a grinding balance between restriction and recovery. 

In any event, many of the policies most relevant to business will either follow a familiar trajectory (towards China) or face steep political hurdles (like a green recovery or sharp tax hikes), sustaining a substantially recognisable business environment. With the US-Mexico-Canada Agreement (USMCA) in the rear view, further trade liberalisation is explicitly on the back burner under an avowedly protectionist consensus for manufacturing sectors. 

Still, a more traditional, predictable, bureaucratic, and transparent government itself will be a big change – and broadly good for business. Even if the geopolitical genie cannot be put back in the bottle, the administration’s support for multilateral coordination will alleviate trade and investment tensions with many US partners and allies. Increased US respect for international institutions will underwrite more predictable rules relied upon by international business. Administration officials will reliably and credibly speak for the president abroad, reducing uncertainty about US posture and actions.  

Companies operating or investing in the US will still face a business risk environment shaped largely by executive action and local prerogatives. Biden intends to undo swathes of former President Donald Trump’s deregulatory agenda, with many a devil in the details (and exemptions). Biden’s particular emphasis on climate change may (re)impose cost and compliance burdens on companies but will also bring the US into better alignment with many of its trade partners, creating new market opportunities. 

Democratic control of the Congress will empower Biden's agenda, but the narrowly divided Congress will still test his legislative nous and coalition management. State and local government (and community stakeholders) will still be decisive factors in the business risk environment. At home, the polarisation unleashed by the disputed US election - dramatised by an unprecedented assault on the US Capitol in early January - will continue to hang over the political system, while the struggle for racial justice will remain a thorny challenge to social cohesion. Biden must also tread a delicate path between moderates and progressives, as indicated by post-election infighting. Domestic challenges may preclude a return to politics as usual, but a more conventional administration is likely to come as a relief to business in 2021.

 

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