The midterms will affect e-commerce in and outside of the US

Changes in tariffs and fluctuations in the value of the dollar will be felt by the e-commerce market.
6 November 2018

US President Donald Trump. Source: Jim WATSON / AFP

The US midterm elections are some of the most polarised in the country’s political history, with voters given the chance to weigh in their opinion on the Trump administration two years into government. Taking place today (November 6), the results will have an impact both within and beyond American borders when it comes to the retail industry, with fluctuations to the dollar and changes in trade regulations affecting a global e-commerce playing field.

Of course, the nature of that impact, right now, is difficult to predict, for the very reason that the results of the election are themselves. At present, a few things are known; voter turnout is at a high, each side of the fence has campaigned ferociously and Trump’s approval ratings sit at just 44%. While things could go either way, experts have laid out some forecasts for how each foreseeable circumstance could impact online trade.

According to Hamish Muress, a currency expert at international payments company OFX speaking to industry press, if the results are as predicted by the polls and analysts— with the Senate being held by Republicans and House of Representatives seized by the Democrats—  immediate impact on the dollar would be “negligible”.

Beyond 2018, however, if they were in a position to push back on and block the Trump camp’s notoriously radical policies, “the Democrats could be expected to rein in Donald Trump’s fiscal spending plan, which could have more of an effect on the dollar,” said Muress.

“There could also be a real risk of government shutdowns, which again would have a negative impact on the dollar.”

But at the same time, Democrats would also be able to push back on the Trump administration’s strict tariff policies, which have worried US-headquartered companies such as Walmart and Target Corp (some of the country’s largest internet retailers), following the announcement of a US$200 billion tariff whacked on Chinese exports, which Trump plans to increase from 10 percent to 25 percent next year.  

On the other hand, a house skewed in favor of Democrats could see a reversal on the US Mexico-Canada agreement which contains benefits for online retailers in North America, in that both Mexico and Canada will increase their minimum shipment value levels of imported goods subject to duty collection and customs.

“Should the Democrats secure both the House and the Senate – a tall order – a tumultuous few months would likely follow,” added Muress. That’s because this outcome could set the wheels in motion for impeachment proceedings linked to alleged Russian interference in the 2016 elections: “Uncertainty in this period would weigh on both economic growth and the Federal Reserve’s interest rate decisions. Fiscal spending could be tapered, exacerbating any downward effect on the dollar,” said Muress.

Regardless of which party gains rank, though, there is one area that won’t change, and that’s online sales tax regulation. Despite bills being introduced, attempting to allow states to require out-of-state merchants to collect and remit local sales tax on goods sold to their residents, few experts expect bills to gain traction.

Whether or not the Democrats take the House of Representatives, however, within each circumstance e-commerce retailers are able to make preparations. Instead, warns Muress, the biggest risk to businesses will be if we were to present with an unanticipated scenario, and we’re no stranger to those in US politics.