How Will the New World Look Like?
A Few Hours Left

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For the rest of the world, the shorthand of the US presidential race has been that Kamala Harris represents continuity and Donald Trump chaos.

A deeper realization is also taking hold in key capitals: America’s brief heyday as the world’s lone superpower is history, no matter who wins.

The WSJ canvassed the mood across time zones and the prevailing sentiment from the Group of Seven establishment to the aspiring powers of the Global South is one of caution and pragmatism. The world is fixated on the result of Tuesday’s vote — even if Washington doesn’t call all the shots any more, it still calls plenty.

America’s vibrant economy remains the world’s biggest and its politicians — especially Trump — have shown they’re ready to weaponize it. So there’s widespread fear of getting caught in the crosshairs if the next president decides to ramp up a trade war with China. Many partners have tariff-escalation plans in the drawer, ready to be pulled out.

But there’s also a growing sense of the US as an aging superpower, one that must pick its battles more carefully in a world where the number of conflicts competing for its attention is on the rise. That’s true for Trump’s ‘America first’ and Harris’ more measured approach. One British diplomat observed that the Roman Empire didn’t suddenly end. Instead, it managed a long decline.

Ukraine is already feeling the cold shoulder, Europe is facing the existential crisis of whether it can defend itself and its neighborhood, and Israel is openly defying the appeals of its main ally and arms supplier in Washington.

A Mideast official said it was demeaning for President Joe Biden to get personally involved in pushing for a cease-fire in Gaza only for it not to happen. That impression is increasingly shared in allied capitals beyond the Middle East.

Of course, the stakes of the US election remain sky high for the world. Foreign capitals — both friends and foes — have rarely been so open in showing their preferred outcome, from public endorsements to the covert efforts to meddle that US intelligence regularly reveals.

The global impact could be seismic. Should Trump win and seek a deal with Vladimir Putin that sells Ukraine out, the European Union will split between those who would welcome any opportunity for peace — however premature — and other nations who would want Europe to back Kyiv on its own. The “Trump electroshock” is how some on the continent describe it.

Harris or Trump? Some claim that the future of Europe depends on the American elections, while it depends first and foremost on us. On condition Europe finally grows up and believes in its own strength. Whatever the outcome, the era of geopolitical outsourcing is over.

If you’re a historic foe like Russia trying to rebuild the Soviet orbit, a relic of the “axis of evil” like Iran, or a contender for global clout like India, the view that America’s best days are behind it is an opportunity to exploit.

North Korean troops are in Russia fighting in its war against Ukraine, Kyiv says. India is being accused by Canada of assassinating a Sikh separatist on its soil. China is providing support for Moscow amid its war in Ukraine and pushing harder in the South China Sea. In each case, the sense is that the US can’t or won’t do much to stop it.

Though she’s stuck close to Biden’s policies, Harris is seen as a different generation, less steeped in the Atlanticism of the Cold War. Some in Europe peg her as a Californian; more attuned to Silicon Valley and potentially more interested in the Indo-Pacific, where she also has family roots.

As for Trump, not all US allies see his unpredictability as purely a liability. Though he’s seen as friendlier to Russia and Israel than Harris would be, some hope he might surprise with a tougher line. Aspiring powers like India and Turkey, meanwhile, are quite comfortable with his more transactional approach.

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She dodged the question of whether Netanyahu can be considered a close US ally but called Iran America’s greatest adversary during the campaign.

Trump says the Oct. 7 attack would never have happened had he been president, without saying how he would have prevented it. He’s said Israel needed to “do a better job of public relations” and called on the country to “get it over with.” In the debate in September, he dodged the question of whether he would support a Palestinian state. He has called for more steps to isolate Iran. In his first term, he also helped broker the Abraham Accords normalizing relations between Israel and some Arab states.

For Harris, Biden’s stalwart support for Israel as regional underdog may appear better suited to earlier decades. If elected, she’d likely apply more pressure to limit the humanitarian cost of the conflict. For Trump, a reasonable base case is continuity in US support for Israel but less diplomatic engagement around the edges.

Still, Trump’s transactional approach abroad and rock-solid MAGA base at home mean there’s more scope to be surprised. For the global economy, the key risk is higher oil prices.

The geopolitical risk premium for oil stayed close to zero after Israel’s relatively restrained strikes on Iran on Oct. 26, and neither candidate is aiming to further inflame tensions.

The prospect of rising protectionism has central bankers and economists worried that US moves to close its market could fuel broader trade wars that will slow global growth and raise inflation.

The Yangshan Deepwater Port in Shanghai. Photographer: Qilai Shen/Bloomberg
Harris supported a Biden administration decision to extend Trump-era tariffs on China and has backed tens of billions in subsidies for clean-energy, infrastructure and high-technology investment in the US. She has embraced some trade deals but as a senator opposed others and has sought to build in protections for workers and the environment.

Trump calls for sweeping tariffs of up to 20% on imports, as well as levies as high as 60% on trade with China as a means to stimulate investment in the US, though he’s said some of the figures may be negotiating tactics. Trump argues the current international trading system is rigged against the interests of the US and promises a rebalancing if he wins the presidency again.

Trump’s first term brought 25% tariffs on hundreds of billions in US-China trade. That generated a lot of news headlines, but not much impact on the macro data. For his second term, his promise of 60% tariffs on China and 20% on everyone else would change the game.

If Trump delivers on his campaign pledges and the rest of the world retaliates, our model shows the US share of global goods trade would crater to 9% by 2028 from the current 21%. For China, almost 90% of exports to the US would be wiped out. For Mexico and Canada, which count the US as their dominant trade partner, the drop is more than 50%. Under Harris, continuity of Biden’s “small yard, high fence” policy to block China’s access to critical technologies is a good bet. Still, Harris’ pragmatism, and a change of the guard in top policy jobs, mean the size of the yard and the height of the fence could both surprise.

US efforts to manage the competition with China have grown increasingly fraught as Beijing’s economic and military clout have expanded alongside Washington’s attempts to counter them.

China has ratcheted up military exercises around Taiwan, which it claims as a rogue province. The island and its residents rely on the US and its allies to back them up in the event the pressure escalates into open conflict. In the balance is the heart of the world’s chipmaking industry — vital to economies globally.

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Harris embraces the Biden administration’s approach to China, with export controls on key chip and other sensitive technologies and supports the US commitment to ensuring Taiwan’s security (but not independence, which China bitterly opposes). She’s backed the expansion of alliances across the region to counter Beijing.

Trump pledges to impose sweeping tariffs on Chinese exports in an effort to reduce dependence on Beijing in “critical areas.” Trump has claimed Taiwan “stole” the US semiconductor business, arguing it should pay more for its own security, without elaborating on what he means. He has refused to commit to come to its defense in the event of a Chinese attack, reverting to long-standing US policy. He has called on US allies Japan and South Korea to spend more on their own defense, threatening in the past to reduce military commitments there and restrict trade.

The disastrous economic and foreign policy costs of abandoning Taiwan limit room for maneuver under either Trump or Harris. The most likely outcome if Trump wins: a more transactional approach where US security support remains but Taiwan faces pressure to accelerate the construction of chip plants in the US and amp up purchases of US arms. We’d expect Harris to reaffirm America’s policy of strategic ambiguity — meaning hints but not commitment to defense of the island.

As Biden deviated from that policy with a full-throated commitment, anything less might strike Beijing as a step back in US support. For the global economy, the stakes in the Taiwan Strait couldn’t be higher. Take out the Taiwan link in the semiconductor supply chain and the cost to global GDP could run as high as $10 trillion.

The biggest wave of new immigrants to the US in years has catapulted the issue to near the top of the political agenda, with both parties now pushing for restrictions even as government data shows the influx has been critical to powering economic growth since the pandemic and has slowed this year amid tightened controls.

Harris has supported tighter limits on undocumented immigration and restrictions on asylum to stem the flow of people seeking to cross the US southern border. She’s promised to push for a bipartisan bill that would combine new asylum limits with more funding for processing and judges. She’s also advocated steps to increase legal immigration and provide a pathway to citizenship for some migrants.

Trump has called for deporting more than 11 million undocumented immigrants, creating detention camps and deploying troops at the Mexican border, as well as strict limits on a range of forms of legal immigration, including asylum, and even birthright citizenship for the children of undocumented parents.

Trump’s pledge to close the border and deport unauthorized migrants would come at a significant cost. Taking inflows of new immigrants down close to zero and deporting those that arrived since 2020 would put a 3% hole in US GDP by 2028.

Origin countries like El Salvador, Guatemala, and Honduras benefit from remittance inflows equaling as much as a fifth of GDP a year. Mass deportations from the US could reduce the total. Harris is taking a sterner line on border security than in the past.

Still, relative to Trump her policies are less severe, and would have a smaller impact on US growth and remittance flows.

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Putin's Vision of the Future of Ukraine

Putin has suggested Ukraine could be placed under a temporary UN-led government to organise fresh elections in comments rejected by a US spokesperson.

It was not clear how seriously the Russian president’s comments should be taken, given that a couple of hours later the Kremlin clarified that Putin had not raised this idea in recent phone calls with Donald Trump.

In remarks broadcast on television on Friday morning, Putin said the idea would be to allow Ukraine to “hold democratic elections, to bring to power a viable government that enjoys the trust of the people, and then begin negotiations with them on a peace treaty” – though he later said that was just “one of the options”.

“Under the auspices of the United Nations, with the United States, even with European countries, and, of course, with our partners and friends, we could discuss the possibility of introduction of temporary governance in Ukraine,” Putin said.

The remarks indicate that any negotiated end to the war in Ukraine is some way off as Russia continues to add conditions to achieving a settlement while Kyiv has said it would sign up to a 30 day ceasefire if Moscow agreed.

Ukraine suspended elections when it introduced martial law after Russia’s full scale invasion in February 2022. Zelensky’s five-year term was supposed to end last May, but a vote is not expected to be held until security conditions allow – and there is little public pressure to have one.

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Iran, Israel, Future That Can Never Happen

Iran cannot deter Israel. Israel’s military and covert capabilities have had free rein to take on the Islamic Republic and its partners. Iran’s deterrence failure has brought the regime to an uncomfortable choice: risk everything to dash for nuclear weapons, or place itself at the mercy of Jerusalem and Washington. How did things get here?

Before April of last year, Iranian deterrence looked solid enough. Tehran had a four-legged stool of answers to Israeli and American threats.

The first leg was the Islamic Revolutionary Guards Corps (IRGC) Aerospace Force’s (AF) arsenal of thousands of ballistic missiles, cruise missiles, and drones, ready to strike around the region.

They’d used this tool to retaliate against the U.S. assassination of IRGC Quds Force (QF) commander Qassem Soleimani in 2020, hammer ISIS targets in Syria, and conduct many lower-profile strikes on Kurdish separatists and alleged Israeli safehouses in Iraqi Kurdistan.
 
The second leg was Iran’s network of proxy groups. The IRGC-QF had strong relations with a robust array of militant groups across the greater Middle East, stretching from recruiting pools among the marginalized Shia populations of Afghanistan and Pakistan, to militiamen in Iraq and Syria, to the Houthis of Yemen.

The crown jewel of this network was Hezbollah, the Lebanese militant group that boasted some 150,000 missiles, rockets, and drones able to strike across the length of the land of Israel.
 
All of these groups were battle-tested, having fought in the Syrian or Yemeni civil wars. The relationship with Hezbollah was especially robust, with talk that the Lebanese group was less a proxy for the Islamic Republic and more a partner with it.

Hezbollah appeared to be locked in a mutually assured destruction relationship with Israel, with both sides unwilling to kick off a full-scale war. It was widely assumed that a major Israeli strike on Iran—such as on the nuclear program—would trigger a major Hezbollah strike on Israel.

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