Trump or Biden: with whom would Hungary do well and with whom?

Today’s US presidential elections also have a very important reading, namely how diplomatic and economic relations are developing for Hungary. The situation is particularly spicy because the situation may be different in the two areas: Donald Trump’s victory may lead to further improvement in political relations, but his economic ideas about the EU may also cause direct damage to the Hungarian economy.

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When Orbán supports Viktor Trump, it is for political reasons

Prime Minister Viktor Orbán also announced in the 2016 elections that he was confident of the victory of the then Republican candidate, Donald Trump. The prime minister seemed to have taken a great risk with this, but in the end his expectations were met, Donald Trump moved into the White House. Even before the current elections, Orbán stated that he was confident of the Republican president’s reelection, and this is completely understandable from his point of view. In the last 4 years, diplomatic relations between Hungary and the United States have clearly improved (according to the Prime Minister, relations have not been so good since the change of regime), and Orbán traveled to Washington in May 2019 at the invitation of Donald Trump. This was undoubtedly an important diplomatic event, although Trump did not pay special attention to Hungary among the countries of the region, he met with the Polish and Czech prime ministers before Orban.

This was not the only intergovernmental consultation between the parties, Hungarian Foreign Minister Péter Szijjártó consulted several times with the current US Secretary of State, just as Viktor Orbán spoke with the US President several times by phone. Although at the level of concrete actions, only the bilateral Defense Cooperation Agreement (DCA) can be highlighted, It is clear from the verbal gestures that relations between the United States and Hungary have improved in the last four years.. It is telling, and speaks volumes about Viktor Orbán’s expectations and interests, that the CEU case could not significantly damage this burgeoning relationship either.

This is a perfect example of why Viktor Orbán can expect a victory with the trump card: DONALD TRUMP’S FOREIGN POLICY IS NOT CHARACTERIZED BY PREVIOUS AMERICAN DOCTRINE,

Trump’s foreign policy is characterized by absolutely incoherent, non-systemic, ad hoc, often contradictory actions, and if one can find a common voice with a leader, relations cannot be expected to deteriorate any time soon. Of course, unpredictability is also part of Trump’s approach, but so far there has been no conflict of interest on the horizon against the Hungarian government, while on an ideological level the two leaders (Orbán and Trump) are quite close.

The current Hungarian government is only interested in supporting Trump’s victory because the experience with the other side is not good. Joseph Biden was vice president of the Obama administration and has since defended the exports of American democracy for decades, and has seen and acted actively in violation of American democracy in the alleged or actual violation of the principle of liberal democracy. This has repeatedly generated conflicts between the Hungarian and American sides (which, by the way, neither the Hungarian nor the overseas leadership can have an interest in an area in the immediate vicinity of one of their main rivals, Russia). It was not even necessary for the first swordsman to elect Bident as president: in one of his campaign events, he cited Hungary as a negative example, to which Foreign Minister Péter Szijjártó reacted to the scandals in Ukraine with his son Biden. From a political and diplomatic point of view, then, it is clear that Trump’s resumption of relations between Hungary and the United States would be a good one, at least at first glance.

From an economic point of view, we can catch Trump

In general, bilateral economic relations are not so significantly transformed by a change of government and, by default, we can expect that regardless of the outcome of the US presidential elections, economic relations between Hungary and the United States will continue unchanged. . However, there is a fundamental risk that we cannot ignore: this is Trump’s idea of ​​a trade war.. The US president is very concerned about the trade deficit with the EU (and everyone else).

For this reason, and due to the (truly) uneven regulatory environment in the auto and agricultural sectors, Donald Trump has repeatedly contemplated raising taxes on European exports.

for example, it would affect European cars with tariffs of 25% instead of the current 2.5%.

It goes without saying that Hungary, where the weight of vehicle production is significant, would be particularly sensitive to this. If we look at it first, seeing that Trump’s plan applies to car exports in Europe and not Hungary, then we must be aware that The role of the United States in Hungarian foreign trade, and within it, the weight of automobile exports to Hungary, should not be underestimated at all. In 2019, for example, we exported $ 3.5 billion worth of goods to the United States, and our trade surplus is huge relative to the world’s largest economy.

Although our most important trading partners are usually European (especially regional) countries, in the first seven months of 2020 the United States was our 11th most important trading partner, according to the CSO.

And if we look at what we export to the United States by product category, we can no longer hesitate at all when we hear about Trump’s plans for a trade war: the most important export items are machines.

Within mechanical engineering, vehicles feature prominently, including domestic cars, and vehicles destined for the United States accounted for HUF 250 billion of exports in 2019.

So if Trump really did increase tariffs on European cars tenfold, it would have a direct impact on the most serious sector of the Hungarian economy.

This price increase would lead to a decline in US sales and, in the absence of new markets, a decrease in Hungarian production, leading to a measurable but small decline in Hungarian employment, investment and ultimately GDP. . And this is just the direct effect, through German automotive products, Hungarian suppliers to German industry would also suffer the indirect effects, not to mention the deterioration of the overall European economic outlook – Remember, a significant part of Europe’s total GDP is explained by net exports to the United States.

Because of their participation, we asked domestic auto operators what proportion of sales went to the United States.

• Audi responded that 164,372 cars were produced at its car factories last year, 16 percent of which went to the United States.
• According to a statement from Daimler headquarters, more than 8,000 of the CLAs produced at the Kecskemét plant were sold in the United States in 2019 (total sales were more than 253,000).
• Opel, for its part, said that the Szentgotthárd plant only produces engines for European installation, which are also used on the continent, so they are not affected.
• Continental did not respond, Bosch did not send a response until our article was published.

From the above it is clear that the trade war started by Trump would really hurt the Hungarian economy, not a little. Here, however, it must be emphasized that the possibility of a trade war is only a risk, and not necessarily a realistic scenario, even in the case of Trump’s resumption, so we cannot assess it in advance in economic expectations.

What can we expect from Biden?

For Joe Biden, we have more political risks to face, as mentioned above, but they are unlikely to have a direct and immediate economic impact. The Democratic candidate would probably try to normalize transatlantic relations, so we should not expect trade wars or tariff increases in any way. However, we must not feed the illusion that the free trade negotiations seen under the Obama administration will be revived, because the United States and the EU currently do not have the political mandate or the capacity to do so during the crown crisis. However, Biden’s plans are also not neutral for Europe: on the one hand, a strongly protectionist program would undermine the interests of European investors (if implemented, of course) and, on the other hand, growth-enhancing fiscal expansion would be it would spread to Europe.

In summary, it can be said that the assessment of the trade policies of both candidates is only possible in a range of uncertainty, within which the best result from Biden, the worst from Trump, is expected.But it is conceivable that in the real politics of everyday life the trade policy of the two candidates is not as different as might be expected on the basis of stylistic characteristics and negotiating techniques. The stakes, on the other hand, are greater for Trump.

There is a third important aspect

In short, however, it is necessary to address a geopolitical aspect that, if both candidates are elected, could have an impact on relations between Hungary and the United States. This is nothing more than a problem for China. There is also a broad consensus among Democrats and Republicans that China’s economic and political power must be balanced, but this is not so typical of EU policy makers. Also for Hungary, the volume of bilateral trade far exceeds the trade between the United States and Hungary:

In connection with this, it is also worth talking about the strategic economic importance of the opening to the east, think only about such important investments as the construction of the Belgrade-Budapest railway or the Huawei developments in Hungary. The latter may be particularly worrisome in the eyes of the next U.S. leadership, because China’s technological catch-up is not only a threat to Trump’s leadership in America’s eyes, but it is surrounded by a full consensus of United States.. It would not be surprising if the United States would put Hungary at a crossroads on the China issue in the next decade, regardless of who the country’s president is.

Cover image: Getty Images