Joe Biden's second term could disrupt markets more than Donald Trump's reelection, expert says

America’s deep partisan divide threatens to inject uncertainty into markets even if Joe Biden wins a second term, according to economic historian Adam Tooze. That’s because Republicans may lash out more should he defeat Donald Trump again.

“The more dangerous scenario from a political point of view is that Biden wins,” said Tooze, a Columbia University professor who spoke Tuesday at the World Economic Forum in Dalian, China.

The uncertainty from a Biden win comes from how a Trump-led Republican party might react to a second defeat for the former president, said Tooze, author of Crashed, a history of the 2008 financial crisis. Markets may see it as a less stable outcome, he added.

Biden and Trump are scheduled to hold their first debate of the 2024 US presidential general election cycle on Thursday. Their bitter 2020 contest in which Trump contested the loss and his supporters rioted at the US Capitol continues to reverberate.

A Bloomberg News/Morning Consult poll in May showed Trump pulling ahead of Biden by 4 percentage points across seven key swing states amid pessimism over the economy.

The election’s outcome could have a big impact on China and the US economy. During the campaign Trump has floated the idea of 60% tariffs on Chinese-made goods. And Biden has ramped up tariffs on Chinese electric vehicles, solar panels and steel, as well as increasing restrictions on semiconductors.

Economists have warned that Trump’s trade agenda could amount to a tax increase for American households, raising prices on a broad assortment of goods. That tariff plan would also likely send inflation above the Federal Reserve’s target and pressure the bank to raise interest rates, Bloomberg Economics said in a report in April.

The view within Beijing is that both candidates are intent on containing China and disrupting its rise, Bloomberg reported this month, citing Chinese officials.

Harvard University professor Graham Allison said he’s skeptical of US claims that subsidies are the main reason that China’s EV industry has been so competitive.

“I’m dubious about that. I think largely this has been a success of a highly competitive environment in China for EVs,” said Allison, who was on the same panel as Tooze.

Chinese Premier Li Qiang warned earlier Tuesday of the negative consequences if nations part ways economically, while also countering criticism that his country’s industrial policy has led to overcapacity.