What Does a Biden Presidency Mean for E-commerce?
Finally, we did it. We’ve chosen our new POTUS 🎉
It’s difficult to predict if this choice was right or not (let’s believe it was), but the one thing we can confidently claim — doing business in America won’t be the same. And e-commerce space won’t be the same.
In this article, we’ll examine how the e-commerce business could change with Joe Biden elected.
Round 1. Taxation
What’s the plan? In their 10-year released plan, the Democrats suggested rolling back the corporate tax cuts, reducing incentives for tax havens, evasion, and outsourcing, and closing any loopholes in the tax code that encourage wealth, not work.
As Democrats traditionally bet on corporate income taxes, Biden is planning to raise its rate to 28% from the current 21%.
He wants to apply Social Security taxes to income above $400,000 and levy at least a 15% tax on book income of large corporations.
As for business…no company “should absolutely be in a position where they pay no tax and make billions and billions and billions of dollars,” Biden said. So, Amazon-like companies will have to contribute more funds to the country budget, IF the law is signed. Poor Jeff 😈
✅ What about e-commerce?
Personal taxes. Biden will definitely roll back tax cuts for individuals that were introduced in 2017.
Due to higher personal taxes, the spendable income will fall, as well as the purchasing power of buyers, and individuals start to spend less money, including shopping online.
Corporate taxes. Lower corporate taxes are clearly more favorable for e-commerce. It means companies will have much more resources to invest in business processes and innovation, which would lead to increased productivity and more sales in the end.
Biden’s tax policy may have a negative impact on the whole business sphere, including e-commerce, forcing companies to search for more favorable tax rates and structures, and register their headquarters abroad.
If this hypothesis actually turned out true, and a large part of companies was to relocate, it would carry a significant blow to the U.S. economy, multiplied by the COVID pandemic.
Amazon time. Biden claimed his willingness to fight Amazon, which shared 49% of the US e-commerce market ($256,7 billion) or 5% of all retail spend in 2018.
Amazon pays taxes at an average rate of 13% ($33,3 billion), nearly half of the average rate companies from S&P 500 pay. Other big corporations like Facebook, Alphabet, and Apple also pay taxes at a rate significantly lower than the average.
Good news for mid-sized companies. If the corporate tax rate was to increase for large enterprise and tech giants, their rapid expansion would slow down, giving the chances for smaller retailers to get a larger market share.
Round 2. Human Capital and Labour Productivity
Biden respects immigrants and understands the value of attracting global talent to the country.
He suggests updating the immigration policy and rethinking the response to the Covid-19 consequences.
Against outsourcing. In addition to the 28% corporate tax, Biden promises a 10% Offshoring Penalty surtax, on profits of any production by a US company overseas for sales back to the US.
Totally, companies would have paid a 30.8% tax rate on any such profits.
Such rules will force companies to use offshore resources illegally or to hire only local specialists with higher rates. Again, this added value will be included in the final price of the goods.
Biden will also cancel all deductions and expenses write-offs for moving jobs or production overseas, instead, offering these jobs to American workers.
✅ What does it mean for e-commerce?
Thanks to globalization and digitalization…it’s now easier to find a skilled specialist overseas than inside the country where the competition for talents is much higher.
Immigration has contributed immensely to America’s economic success, making it a global leader in tech.
Hiring remote teams and agencies appeared a really good way for companies to scale up their teams. Imagine that you get access to a pool of talent from all over the world and can choose the best of them.
In September, Joe Biden and Kamala Harris announced the steps that they will take to stop outsourcing, including a series of executive actions during their first days in office.
Hope these restrictions and new rules will be connected mainly with manufacturing and offline industries, and digital businesses won’t suffer from this change.
The new reality. Perhaps, the only positive moment of the Covid-19 spread is the fact that companies realized that our world won’t be the same anymore. Remote work, outsourcing services, staff optimization, and automation are the keys to this new working reality.
Although many people argue against the automatization of business, we can’t imagine the new world without it.
We already see the examples of partially (like Amazon Go) and fully automated shops (like ‘dark stores’ by The Whole Foods).
And that is the future 🚀
In terms of technology…Biden’s position looks more attractive, though some moments look contradictory.
His support of small and mid-sized tech businesses can improve the consumer welfare standard and maintain greater competition in the marketplace.
At the same time, tech giants like Amazon, Google, Facebook, and others have contributed a lot to the U.S. economy, and if they face some strict regulations, it may lead to some countermeasures from their side (e.g. moving offices to other countries).
Diversity. To honor their commitments to their multicultural voting blocs, a Biden-Harris ticket may also aim to support tech start-ups led by diverse founders.
Round 3. Foreign Trade and Relations
Trade liberalism. Liberal Biden will definitely not support the ideas of protectionism. He used to be a longtime supporter of trade liberalism and believes that Washington can become the leader of global trade and commerce worldwide.
Some experts think that his trade paradigm won’t return to the one Clinton, Bush or Obama suggested.
Things that Biden would like to focus on are connected with environmental and labor issues rather than manufacturing.
Biden believes continuous isolation and lost partnership agreements may lead to serious economic consequences, and in addition to the crisis caused by the COVID-19 pandemic, it can turn into a devastating strike for the whole system.
Biden backed free-trade policies during his three decades as a senator. And despite the fact he approved the TPP agreement signed by Obama, later he said that its updated version looks more thoughtful.
In the confrontation with China….Biden also supports the idea of China being the main competitor of the U.S. in technology development and business dominance on the global market.
Biden promises a more effective rebuff to China combining efforts with trade allies to pressure Beijing.
✅ What does it mean for e-commerce?
Is America already great? For Biden, the future of America looks more traditional, grounded in international institutions, and based on shared western democratic values.
His to-do list includes rejoining with global alliances and repairing ruined relationships with world organizations.
Trade war with China. As the trade war between the U.S. and China has continued to heat up, Chinese nationals potentially could turn to a surprising way around tariffs: increasing the number of counterfeit goods, which cost the U.S. economy an estimated $600 billion a year, or 3% of the U.S. gross domestic product.
China has the largest market with a gross merchandise value of e-commerce sales expected to grow by 11.2% from 2019 to 2024, faster than the expected 6.6% U.S. growth over the same time period.
The plan to curb their growth may be a solution, but it shouldn’t look like a trade war declaration.
More polite, please 🙂
The confrontation between the 2 largest world markets has negatively impacted both sides.
The U.S. government should… develop favorable conditions for tech companies so that they wouldn’t place their factories in the East to cut costs.
International organizations and agreements also play an important role in establishing strong relationships between countries, so Biden’s position is quite good in terms of e-commerce evolution.
Final
Let’s summarise…
The growth of the e-commerce market share in the US shows no signs of stopping.
Retail e-commerce sales in the United States are projected to grow at a fast pace in the coming years, going from 505 billion U.S. dollars in 2018 to over 735 billion US dollars in 2023.
For what reasons e-commerce has grown? Such rapid growth can be explained by a number of factors, like the increased usage of smartphones or more flexible ways of life.
But one of the most significant of them was the Covid-19 spread with new rules of social distancing that almost killed physical retail during the first wave of the pandemic in the spring of 2020.
As for the future of e-commerce, Biden believes in technology development, encourages international agreements and alliances, and hopes to take more effective measures to come up with the pandemic crisis consequences.
Anyway, the e-commerce space will change rapidly, as it does during 2020.
And we’re looking forward to seeing how it would look like in the next 4 years…😍
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