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Donald Trump’s path to re-election narrowed Wednesday afternoon as Michigan and Wisconsin tipped into the Democratic column. Theoretically, it’s still possible for Trump to squeak through by winning Pennsylvania, Georgia, North Carolina and Nevada, where the count remains incomplete.
But the word from Washington is deadlock. The two Houses of Congress are split as evenly as the Electoral College Vote. The Republicans probably will emerge from the dustup with a bare two-vote majority in the Senate, while the Democratic majority in the House of Representatives will shrink sharply from the pre-election ratio of 232 to 197.
A final tally of an election held during a pandemic with a high proportion of mail-in ballots will take weeks and likely will be subject to legal challenges. Unlike 1960, when the Republicans believed that the Chicago Democratic machine had stolen the election for John F Kennedy but declined to challenge the results in the interest of national unity, this election will be challenged for months and perhaps years.
A large part of the Republican base never will be persuaded that Biden won without chicanery, and that perception will embitter an already fraught political environment.
Even if Trump loses, his unexpectedly strong performance denies Biden a mandate. Biden, the self-appointed re-uniter of the American people lost massively in the American heartland, and cannot claim to have achieved anything of the kind. If Biden wins, he will limp into the White House crippled.
No one will do anything of importance in Washington for the next two years and probably the next four. There will be no Biden tax hikes, no Green agenda, no reform of the medical system, and no redistribution of income.
If (as appears increasingly unlikely) Trump wins, there will be no new fiscal initiatives and no grand infrastructure plan. In the view of Goldman Sachs economists, there will be little new fiscal stimulus even though the US economy urgently needs it.
On paper, this looks as close as the 2000 presidential election, when George W Bush defeated Al Gore by a few hundred votes in Florida, after protracted legal wrangling about the validity of a tiny number of ballots.
The 2000 election was close, however, because the two candidates were so difficult to tell apart that the votes sorted themselves into roughly equal heaps almost at random. Not since the 1930s have Democrats and Republicans offered such radically opposed visions of America, and back then the Democrats won by landslides.
Two implacably hostile and utterly irreconcilable political camps now challenge each other’s legitimacy. In the Republican view, the Democrats are America-hating sponsors of urban violence; in the Democratic view, the Republicans are racist xenophobes.
Not since 1860 has the United States paired off into hostile camps of comparable strength, except that the issue then was settled with blood and iron. Today it won’t be settled at all.
Perversely, that is not the worst possible outcome, at least in the view of financial markets. Once the feared blue wave dematerialized and the Senate appeared safe in Republican hands, US tech stocks soared, with a gain in Wednesday’s New York session of 3.85% for the NASDAQ Index. Chinese tech stocks did even better, with the KWEB exchange-traded fund jumping by nearly 7%.
A Biden Administration would bring some important changes to US policy, but almost exclusively in foreign policy matters that remain under control of the executive branch of government. Few of these matter to the markets, except for one big one, that is, the US relationship with China.
Biden will remove some if not all of Trump’s tariffs on Chinese imports, which the Democratic candidate ridiculed during the campaign. And a Democratic Administration would make China an offer it wouldn’t want to refuse, namely an easing of restrictions on the sale of US technology to China in return for greater access to the Chinese market for US tech firms.
China built its Internet behind a Great Firewall to prevent superior Western companies from stifling Chinese competition in the cradle. Now that Tencent, Alibaba and Huawei have developed world-class software business of their own, including a new Huawei operating system and mapping applications that compete head-on with Google’s Android, the nascent giants of Chinese software are ready to compete with their Western counterparts. Chinese tech executives believe that Beijing would welcome such a deal.
At home, the United States will continue to struggle with the short-term implications of the Covid-19 pandemic as well as the long-term implications of a public health system that did not prove sufficiently robust to contain the disease.
The most important data point for the United States on Election Day was not any particular vote count, but rather the Covid-19 body count, which rose to 1,190. The seven-day average of Covid-related deaths now stands at 890, or an annual rate of 325,000 per year.
China’s unofficial pundit on matters American, Global Times editor Hu Xijin, tweeted early this Wednesday morning (Eastern time): “Chinese netizen’s comment: Win-win situation in the US election.” From the standpoint of America’s strategic rivals, a paralyzed presidency is a gift from destiny.