Trump vs Biden. Whose Side is Ecommerce On?
Val Kuznetcov, CGO
Oct 29, 2020
Less than a week left before the Americans elect the new President. It’s difficult to predict which way the votes will go, but the one thing we can confidently claim—e-commerce space won’t be the same. We do not pretend to be political experts, but in this article, we’ll examine how the e-commerce business could change or be affected in either scenario. Let the battle begin!
Known Present vs Unknown Future

Okaaay… To start with, let’s mention that this battle can’t be fair. 

Why so? We have been witnessing Trump’s politics for 4 years already, and after analyzing its main results, we can build some hypotheses for the next few years. As for the win of the Democratic Party, we can just rely on Biden’s presidential campaign and believe that all the promises will come true *coughs twice*.

Unfortunately, we won’t hear the direct overview of the e-commerce future from both sides, but this industry is highly affected by factors such as taxation, trade policy, foreign relations, laws, and capital flow.

So, let’s start our little analysis.

Round 1. Taxation

 

  • Red corner

 

What’s done. In their pre-pandemic budget proposal, the Trump administration promised to extend the massive Tax Cuts and Jobs Acts, which was signed in 2017 and had become the largest overhaul made in the last 30 years in tax code.

For people...the law saved the previous structure of seven individual income tax brackets, but the majority of rates were lowered. The maximum rate for income over $500,000 has fallen by up to 37% from 39,6%. The lowest rate remained at 10%. 

For business...Trump created a single corporate tax rate of 21% and canceled the corporate alternative minimum tax.

In combination with local and state taxes, the new statutory rate is now equal to 26.5% (the average weighted of EU countries - 26.9%).

What to expect? Those who support the idea of low corporate tax rates believe that due to such measures companies won't look for more attractive business conditions abroad and the amount of M&A international deals will decrease.

 

  • Blue corner

 

What’s the plan? In their 10-year released plan, the Democrats suggested rolling back the corporate tax cuts, reducing incentives for tax havens, evasion, and outsourcing, and closing any loopholes in the tax code that encourage wealth, not work.

As Democrats traditionally bet on corporate income taxes, Biden is planning to raise its rate to 28% from the current 21%. 

He wants to apply Social Security taxes to income above $400,000 and levy at least a 15% tax on book income of large corporations. 

As for business...no company "should absolutely be in a position where they pay no tax and make billions and billions and billions of dollars," Biden said. So, Amazon-like companies will have to contribute more funds to the country budget, IF the law is signed. Poor Jeff.

For those, whose annual income is higher than $1 million, it's supposed to gain tax capital and dividends at regular rates.


What about e-commerce?

Personal taxes. If Trump wins, he will likely extend the 2017 tax overhaul for individuals. As for Biden, in case of victory, he will roll back tax cuts. 

Good cop/bad cop.

Due to lower personal taxes, the spendable income is growing, as well as the purchasing power of buyers, and individuals start to spend more money, including shopping online. A point for Trump here.

Corporate taxes. Lower corporate taxes that Trump suggests are clearly more favorable for e-commerce. It means companies will have much more resources to invest in business processes and innovation, which would lead to increased productivity and more sales in the end.

If Biden is elected, his tax policy may have a negative impact on the whole business sphere, including e-commerce, forcing companies to search for more favorable tax rates and structures, and register their headquarters abroad.

If this hypothesis actually turned out true, and a large part of companies were to relocate, it would carry a significant blow to the U.S. economy, multiplied by the COVID pandemic.

Amazon time. Both candidates claim their willingness to fight Amazon, which shared 49% of the US e-commerce market ($256,7 billion) or 5% of all retail spend in 2018.

Amazon pays taxes at an average rate of 13% ($33,3 billion), nearly half of the average rate companies from the S&P 500 pay. Other big corporations like Facebook, Alphabet, and Apple also pay taxes at a rate significantly lower than the average.

Good news for mid-sized companies. If the corporate tax rate was to increase for large enterprise and tech giants, their rapid expansion would slow down, giving the chances for smaller retailers to get a larger market share.

Round 2. Human Capital and Labour Productivity
  • Red corner

 

As any other President, Donald Trump dreamt about a low unemployment rate and the creation of thousands of new jobs for American citizens. To complete the goal, his administration developed a range of stimulating measures. 

At least...they tried.

Trump’s anti-record. Due to trade tariffs, hundreds of new jobs appeared in import-competing industries. But in general, tariffs benefited some workers at the expense of others.

The Covid-19 was another factor that contributed to Trump's ‘record’ when the number of job losses became the worst of any American president. Sad story, but to be fair, other presidents never faced anything as pervasive as COVID-19.

Against automation. Trump argues against increased automation and wants to protect American workers from being displaced by machines. 

Automation is the fuel of e-commerce and a perfect way to save time, effort, money, and keep a social distance. 

Cute Amazon robots bringing your groceries right to your door...

Magical drones flying supplies through your window... 

Won’t we see them? Nooooo :(

Banned visas. Instead of investing in technology development, Trump has banned worker visas. Such a step will definitely have a negative impact not only on Silicon Valley, where nearly three-quarters of techies are foreign but also on the whole tech sector, including e-commerce.

Yes, e-commerce businesses may easily and successfully transition to remote, but this process will take some period of time.
 

 

  • Blue corner

 

In contrast to Trump...Biden respects immigrants and understands the value of attracting global talent to the country.

He suggests updating the immigration policy and rethinking the response to the Covid-19 consequences. 

Against outsourcing. In addition to the 28% corporate tax, Biden promises a 10% Offshoring Penalty surtax, on profits of any production by a US company overseas for sales back to the US. 

Totally, companies would have paid a 30.8% tax rate on any such profits.

Such rules will force companies to use offshore resources illegally or to hire only local specialists with higher rates. Again, this added value will be included in the final price of the goods.

Seems that inflation will become a new President of America…

Biden will also cancel all deductions and expenses write-offs for moving jobs or production overseas, instead, offering these jobs to American workers.


What does it mean for e-commerce?

Fewer immigrants - more outsourcing. An average web store creates way fewer jobs than a physical store. (thanks to automation and cunning)

For instance, Amazon has a team of 1 mln. people worldwide. 

Sounds impressive. 

Until the moment you find out that Walmart employs more than 2.2 million associates around the world — nearly 1.5 million in the U.S. alone. 

Very often, you don’t even need to rent a big office to hire the team. 

Thanks to globalization and digitalization...it’s now easier to find a skilled specialist overseas than inside the country where the competition for talents is much higher. 

Immigration has contributed immensely to America’s economic success, making it a global leader in tech. 

Trump’s banning of worker visas has made many tech companies think about opening offices in Canada and other countries that allow immigration or increase hiring of distributed teams. 

Hiring remote teams and agencies is a solution that may become even more popular than it is. Imagine that you get access to a pool of talent from all over the world and can choose the best of them. Software development is one of the industries that widely use outsourcing because of the complexity and diversity of skills needed for each project.

See how you can get an awesome e-commerce customer experience >>>

Biden is against outsourcing, Trump is against immigrant workers. 

And we should make this choice.

The new reality. Perhaps, the only positive moment of the Covid-19 spread is the fact that companies realized that our world won’t be the same anymore. Remote work, outsourcing services, staff optimization, and automation are the keys to this new working reality. 

Although many people, including Trump, argue against the automatization of business, we can't imagine the new world without it. We already see the examples of partially (like Amazon Go) and fully automated shops (like ‘dark stores’ by The Whole Foods). 

And that is the future.

In terms of technology...Biden’s position looks more attractive, though some moments look contradictory.

His support of small and mid-sized tech businesses can improve the consumer welfare standard and maintain greater competition in the marketplace. 

At the same time, tech giants like Amazon, Google, Facebook, and others have contributed a lot to the U.S. economy, and if they face some strict regulations, it may lead to some countermeasures from their side (e.g. moving offices to other countries).

Diversity. To honor their commitments to their multicultural voting blocs, a Biden-Harris ticket may also aim to support tech start-ups led by diverse founders.

Round 3. Foreign Trade and Relations
  • Red corner 

 

Trump’s tariffs and protectionism. Restricting the imports and imposing a series of tariffs on China, Mexico, Canada, the European Union, and other trading partners was supposed to become a rapid way to help US-based businesses, fight unemployment and enhance national security. 

That was the idea of Trump’s trade policy.

The tariff revenues have almost doubled in the last 2 years and amounted to $79 billion in 2019.

Increased tariffs have led to higher prices, making national manufacturing more expensive. 

As a result...Americans started to pay more even for national products, and according to some estimates, it could have cost U.S. families from hundreds to thousands of dollars

The ‘big beautiful’ wall on the U.S.- Mexico border is resonant with Trump’s foreign policy. Following the idea of making America great again, Mr. President started the real trade war and built not only physical barriers with other countries.

Isolation of the U.S. market and the changes made in supply chains have narrowed the path to profitability for many retail companies, especially those, which were focused on overseas manufacturing.

Trump updated the agreement with Canada and Mexico.

The previous partnership NAFTA had no clause on digital trade. 

Now, according to the USMCA..., it’s forbidden for Canada and Mexico to force US companies to store their data on in-country servers. It also guarantees that US companies can't be sued in neighboring countries for much of the content appearing on their digital platforms.

 

  • Blue corner 

 

Trade liberalism. Liberal Biden will definitely not support the ideas of protectionism. He used to be a longtime supporter of trade liberalism and believes that Washington can become the leader of global trade and commerce worldwide.

Some experts think that his trade paradigm won’t return to the one Clinton, Bush or Obama suggested. 

Things that Biden would like to focus on are connected with environmental and labor issues rather than manufacturing.

Biden believes continuous isolation and lost partnership agreements may lead to serious economic consequences, and in addition to the crisis caused by the COVID-19 pandemic, it can turn into a devastating strike for the whole system.  

Biden backed free-trade policies during his three decades as a senator. And despite the fact he approved the TPP agreement signed by Obama, later he said that its updated version looks more thoughtful.

In the confrontation with China…Biden also supports the idea of China being the main competitor of the U.S. in technology development and business dominance on the global market. 

Biden promises a more effective rebuff to China combining efforts with trade allies to pressure Beijing.


What does it mean for e-commerce?

Is America already great? The world, according to Trump, is a place, where America dominates in all directions. All international agreements and unions with other countries go against their greatness.

For Biden, the future of America looks more traditional, grounded in international institutions, and based on shared western democratic values. 

His to-do list includes rejoining with global alliances and repairing ruined relationships with world organizations. 

Trade war with China. As the trade war between the U.S. and China has continued to heat up, Chinese nationals potentially could turn to a surprising way around tariffs: increasing the number of counterfeit goods, which cost the U.S. economy an estimated $600 billion a year, or 3% of the U.S. gross domestic product.

China has the largest market with a gross merchandise value of e-commerce sales expected to grow by 11.2% from 2019 to 2024, faster than the expected 6.6% U.S. growth over the same time period. 

The plan to curb their growth may be a solution, but it shouldn’t look like a trade war declaration. 
More polite, please.

The confrontation between the 2 largest world markets has negatively impacted both sides. 

The U.S. government should... develop favorable conditions for tech companies so that they wouldn’t place their factories in the East to cut costs. 

International organizations and agreements also play an important role in establishing strong relationships between countries, so Biden’s position is much more favorable in terms of e-commerce evolution.

To protect the intellectual property of American brands, President Trump signed a Memorandum on stopping counterfeit trafficking on e-commerce platforms through fines and civil penalties in October 2020.

Will it solve the intellectual property issue? Nobody knows. 

But often restriction measures only contribute to the development of the shadow economy.

E-commerce helps businesses go global. Among other advantages, international trade provides optimal use of natural resources, specialization, fair competition, and price stability. 

It goes without saying that building sustainable relationships with other countries means a lot for e-commerce development.

Higher tariffs help local manufacturers grow their production but make international purchases more expensive for e-commerce businesses selling in the USA. 

As a result...it affects the supply chain of businesses.

Super Final

Let’s summarise.

The growth of the e-commerce market share in the US shows no signs of stopping, but it’s hardly so because of the Republican’s policy. 

Retail e-commerce sales in the United States are projected to grow at a fast pace in the coming years, going from 505 billion U.S. dollars in 2018 to over 735 billion US dollars in 2023. 

For what reasons e-commerce has grown? Such rapid growth can be explained by a number of factors, like the increased usage of smartphones or more flexible ways of life. 

But one of the most significant of them was the Covid-19 spread with new rules of social distancing that almost killed physical retail during the first wave of the pandemic in the spring of 2020.

If Trump wins...we will see the extension of his policy. More profitable taxes or trade barriers? The choice is yours.

If Biden becomes POTUS...Trump will have to change his Twitter name first. 

As for the future of e-commerce, although he is older than Trump, he believes in technology development, encourages international agreements and alliances, and hopes to take more effective measures to come up with the pandemic crisis consequences.  

Anyway, the e-commerce space will change rapidly, as it does during 2020. 

And we’re looking forward to seeing how it would look like in the next 4 years. 


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