Trump vs. Harris: Analysts weigh in on who’s better for Czechia's economy

With the U.S. presidential election exactly two weeks away, a comprehensive analysis by Czech investment firm Cyrrus has found that, overall, a victory for Vice President Kamala Harris would be more beneficial for the European and Czech economies.

Trade is the most important factor in the U.S.-Europe relationship in the context of the Nov. 5 election. Cyrrus has said that Trump’s inward-looking tendencies to trade and protectionism could harm European trade. “Trump is suggesting that if restricting trade with someone else would help some part of the U.S. economy, he would not oppose it. Harris does not have such customs," explained Vít Hradil, economist and co-author of the analysis.

Hradil added that if Trump were to impose tariffs on cars, for example, it would affect Europe's GDP significantly. It is imperative to remember that a huge chunk of the Czech economy is based on the automotive trade and exports to countries internationally. 

"Europe would have to react to that [lessened trade and more tariffs]. It's appropriate to root for Harris here," he said.

In terms of energy, Harris is also seen as a better option for Europe and the Czech Republic. Trump is more in favor of fossil fuels, which could lead to a loss of competitiveness for Europe if fossil fuels become cheaper. "It is therefore better for us if Harris maintains the current course, which is directed towards renewable sources," Hradil explained.

Harris is also preferred in terms of tax policy. Trump is a big supporter of tax cuts, which could lead to an outflow of companies from the EU. "We cannot react by lowering taxes as well. It is therefore better for us if taxes in the US are not reduced," added Hradil.

Trump's confrontational approach to China could also be a problem for the Czech Republic. "Europe is the last person who would like the world to be divided into smaller non-cooperative units," added Hradil. The escalation of global trade disputes could cause a renewed increase in inflation and shortfalls in industrial inputs in Europe, including the Czech Republic.

America's approach to regulations is also important for Europe. The regulatory environment in the EU is one of the strictest, and Harris leans more towards a European stance. "We wouldn't want the gap between heavily regulated Europe and the deregulated U.S. to widen further," explained Hradil.

On the other hand, Trump is seen as better for Europe in terms of some aspects – such as migration policy and labor. The U.S. has been attracting workers from other countries, including highly qualified workers. Limiting the access of qualified workers to the US would slightly improve their availability in the EU, according to the analysis.

While Harris may be the preferred choice for Europe, her policies may not be beneficial for investors, though. "America is the most important market from an equity perspective. Investors would benefit from a Trump victory. He is difficult to predict, but some of the steps he approved during his mandate were beneficial for the stock markets and we can expect him to continue doing so," said Tomáš Pfeiler, portfolio manager of Cyrrus.

Pfeiler added that Trump's tax reform was very positive for the markets, and his victory could lead to an extension of the tax cuts he passed in 2017. "Trump also pushed through a corporate tax cut from 35 percent to 21 percent, which boosted world markets," he concluded.

New data from media magazine The Economist has, for the first time since President Joe Biden dropped out of the presidential race in July, put Trump as the favorite to become America's next president. Poll aggregator FiveThirtyEight puts Harris 2 percentage points ahead of Trump, though this is within the margin of error.