As the US election approaches, we ask how such an event can affect international relations, business performance and insurance risk.

Faced with the changes that will come with either outcome of the upcoming US election — a Kamala Harris or Donald Trump presidency — economists, executives, business consultants and insurers have been busy calculating the likely effects on business.

“The top-of-mind issue is what might happen with financial market volatility because that impacts on interest rates and exchange rates,” says Kelly Eckhold, chief economist, at Westpac New Zealand.

“For a lot of business customers, particularly if they’re trade-focused, the exchange rate is quite important.

“But most firms also care about interest rates. For countries like New Zealand and Australia, developments in foreign interest rates usually play an important role in determining the interest rates available domestically.”

A new president is the only certainty

A paper by the United States Studies Centre, ‘What would a Kamala Harris presidency mean for Australia?’, says that while Harris “is unlikely to diverge significantly from Biden on most issues, her positions on trade and the war in Gaza could be notable exceptions.

Nevertheless, if she wins in November, Australians can expect more continuity than change in US foreign policy.”

A positive election outcome for Trump would likely bring greater change. 

However, it’s important to note, says a report by investment services firm Forsyth Barr, that “markets have done well under both Republican and Democrat leadership, including the last eight years under both Presidents Trump and Biden”.

What about the effect on insurance matters, specifically?

A paper by ECBM Insurance Brokers and Consultants says, “Elections play a pivotal role in shaping the insurance market, as policy decisions, economic shifts and regulatory changes driven by newly elected officials can have far-reaching consequences. In addition, societal behaviour and civil unrest can increase the risks to personal and commercial elements.”

Commercial elements include the ease of sourcing products and materials from around the world, and of exporting to other territories, Eckhold says.

“I would rate geopolitical tension as the biggest individual issue for insurers,” he says. “The impact of leadership change on the geopolitical environment, for logistics costs and risks of operating in different jurisdictions, can be a big challenge.

“For importers and exporters globally, the closure of the Red Sea has had enormous implications. That has been related to the challenges with the Israel–Gaza war.

“The choices made by American policymakers will have implications for how quickly that situation can be resolved. If it were to worsen, it would take even longer to get goods around the world, and it would be a lot more expensive to insure those goods.”

Three areas of interest

Outside of exchange and interest rates, and supply-chain challenges, Eckhold says three groups of issues should be in focus for businesses and insurers as the US election takes place.

“One is the tariff and trade policies,” he says. “There are some quite important differences between the Democrats and the Republicans, and they will be relevant for New Zealand and Australia.

“The second group is around US tax policy, which is related to tariff policy but also related to what level of economic growth we might expect out of the US over the foreseeable future. Ultimately, this will influence the level of inflation and interest rates that flow through to our economies.”

Finally, the third group addresses the topic of foreign policy and the various and numerous geopolitical implications stemming from that.

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