SINGAPORE - For Singapore-based contract manufacturer Watson EP Industries, a Joe Biden presidential victory is a "ray of hope in the time of Covid" as the pressure has eased on its having to move its audio speaker production for the US market out of China.
Hit by high tariffs from the US-China trade war, its US clients had considered shifting production to avoid having to keep paying the tariffs as pandemic-induced lockdowns took their toll on global demand for audio speakers at concerts and events.
Even though tariffs on the firm's exports from its factory in China to the US had been cut to 7.5 per cent from 15 per cent last year, Ms Joyce Seow, Watson's executive director, said: "We kept our mitigation plan in place because Trump is so erratic.
"We have to wait for Biden to get into his role first. Hopefully in two to three months, there will be more clarity on Biden's approach to global trade."
Hopes of a de-escalation of geopolitical tensions under the new President-elect's administration and a possible reduction or roll-back of tariffs animated the rally in stock markets globally and in Singapore Monday (Nov 9).
Across Asia, most markets started the week on a positive note, led by Japan, Shenzhen and Thailand. All three markets posted a 2.1 per cent gain each. Hong Kong, Taiwan and Singapore each closed 1.2 per cent higher.
US stock futures were already sharply higher earlier on Monday with the uncertainty of the election out of the way. But they surged 5.87 per cent (as at 10.20pm Monday in Singapore) after Pfizer said its Covid-19 vaccine was 90 per cent effective.
"We expect to see a de-escalation of trade tensions as Biden criticised how the US economy has suffered from the trade war," Mr Daniel Gerard, senior multi asset strategist at State Street Global Markets, said.
"Even though we don't expect the tariffs to be rolled back immediately, more constructive trade talks could bridge gaps in negotiations, helping remove risk for financial markets. Asia will be a strong beneficiary... due to its relatively better handling of the pandemic," he said.
However, there has been bipartisan support and consensus in the US about containing China on multiple fronts beyond trade, technology and national security issues, Mr Ho Meng Kit, chief executive of Singapore Business Federation, noted.
"A Biden administration is likely to suggest a more measured approach towards US-China relations. It will be less pugilistic and more nuanced, relying on alliances with partners, multilateral frameworks and institutions such as the World Trade Organisation (WTO) and World Health Organisation (WHO)," he said.
Even as there are hopes that the US may rejoin the Trans-Pacific Partnership (TPP), which would be beneficial to Singapore and other members of the trade pact as the US market represents 60 per cent of the TPP's gross domestic product, observers say trade may not be the Biden administration's top priority.
"The concerns in the immediate term are managing Covid-19, US economic recovery, and climate change," Mr Ho said.
"While the status of the US' return to TPP is uncertain now, what we hope... is the US returning to international institutions like WTO to play a pivotal role in discussing and managing trade. This support for a multilateral trading system is critical to an export-oriented economy like Singapore's."
Many are expecting the Biden administration to restore trade alliances and to pursue multilateral rather than bilateral trade deals, Maybank Kim Eng senior economist Chua Hak Bin said.
"There may likely be fewer charges of currency manipulation or undervaluation, and less preoccupation with the size of certain countries' bilateral current account surplus with the US."
Markets will likely no longer be on tenterhooks from tweet-led policymaking, observers say. "This is a relief rally after four years of Trump," CIMB Private Banking economist Song Seng Wun said.
"The markets seem to think there are blue skies ahead even though it is still cloudy," he noted and warned, "We shouldn't expect the beginning of a reset in policy because the US election results show a very divided country, so making policy changes isn't going to be easy. In fact, the policy paralysis we saw in President Barack Obama's second term is a real possibility during Biden's term given a divided Congress."
