Investing.com – The US election is likely to impact the economies of Central and Eastern Europe, the Middle East and Africa, and JPMorgan discusses the potential consequences.
The US investment bank took a look at four key policy areas affected by the US presidential election – tariffs, the dollar, oil prices and Ukraine – and how those areas are likely to impact CEE, Middle East and Africa stocks.
Looking at 60%/10% Definitions Regarding China/the world that Republicans campaigned on, the bank believes this will limit the size and pricing power of mid-tech manufacturers, such as Central Europe and Turkey.
Even if direct exports to the United States from Poland and Turkey are low, to the extent that emerging Europe becomes integrated into Europe’s industrial fabric, we expect a 10% tariff to be harmful.
However, for commodity exporters, such as South Africa and the MENA region, we believe that tariff policy will have little direct impact.
In terms of second-round effects, a 60% Chinese tariff could redirect Chinese exports from the US to the rest of the world – importers, such as the Middle East, North Africa and South Africa regions, could benefit from cheaper Chinese goods that need a new destination.
Also, if the EU moves to limit imports from China, Central Europe and Turkey could gain a share in the European manufacturing mix while excluding Chinese products. However, if the EU does not do so, Central Europe and Turkey could lose production/exports as China shifts its sales from the US to Europe.
Turn to dollarA Republican presidential win and tariffs are likely to strengthen the dollar.
“The rise in the dollar has a direct impact on CEE, Middle East and Africa stocks: good for the US dollar-linked MENA region and bad for everyone else,” JPMorgan analysts said in an October 9 note.
South African stocks are likely to be the most negatively affected by the strength of the US dollar, followed by emerging European stocks and then Turkish stocks. Historically, Turkish stocks have been very sensitive to changes in the US dollar, but due to policy changes since July 2016, their correlation with global factors has decreased.
looking at oilJPMorgan analysts said most investors they spoke to believe Trump is broadly aligned with many of the GCC’s foreign policy goals and that most GCC rulers would welcome a Republican victory…but one of the main talking points in the Republican campaign It is to restore the total price level to its previous level. – Covid levels and gasoline prices cut in half.
“We believe that there is a chance that we will see a policy more oriented towards stabilizing oil prices with some kind of cooperation (either explicit or implicit) with OPEC even at the expense of US production. A small chance, but it is a chance,” the bank added.
The Democratic presidency is likely to continue current policies that allowed US energy production to rise by about 3.8 million barrels per day (total oil liquids) during the Biden administration.
Finally, JP Morgan looks at the relationship between Europe and… Ukraine In particular, the United States.
Trump’s promise to quickly stop the war between Russia and Ukraine likely means accepting Russia’s control over most of eastern Ukraine. It would rupture the strong consensus that emerged after World War II that international borders cannot be changed by force and go against the policy of many NATO allies in Europe and North America.
Trump’s potential halt to Ukrainian military aid would exacerbate the divide between the United States and many NATO members.
JP Morgan added: “We do not know whether the new Trump administration will support the use of frozen Russian assets to offset or rebuild Ukraine’s ongoing defense costs, and we do not know whether the cessation of US aid will come with a cessation of arms sales.” .
A Harris presidency will likely continue the current policy of continued aid to Ukraine with little prospect of changing the status quo.