The US presidential election, the most consequential vote for financial markets in an election-packed year, is weeks away.

With Democratic Vice President Kamala Harris and Republican Donald Trump locked in a close race to win the Nov. 5 election, we look at what matters most for world markets.

Europe in the Balance

For European equity markets, a Trump victory could spell trouble for export-heavy sectors, particularly German automakers such as BMW but also LVMH and other luxury goods makers as concerns of renewed trade tensions loom.

Barclays has warned of possible “high single-digit” percentage drops in European earnings should trade conflicts reignite. Trump has floated plans for blanket tariffs of 10-20 percent on virtually all imports to boost US manufacturing.

On the flip side, a Harris win would be a relatively better outcome for European equities. This could energise renewable energy, a possible tailwind for utilities with large US projects like Orsted and Iberdrola.

Over the longer term, however, her plans to raise corporate taxes from 21 percent to 28 percent could curb margins for American firms and European dollar earners alike. A further cut under Trump would likely be welcomed on both sides of the Atlantic.

The election could have implications for the war in Ukraine. Trump and some Republicans in Congress have questioned the value of US funding for Ukraine’s two-year battle against Russia, while Democrats have pushed to bolster Ukraine.

Aerospace and defense stocks have gained over 80 percent since Russia invaded Ukraine in 2022.

Currency Swings

Trade tariffs are key for traders in the world’s most-actively traded currencies.

The euro, trading below September’s 14-month peaks at around $1.09, is seen as being in the losing camp if a Trump win means higher universal tariffs.

“A Trump win, in the eyes of the market, would take euro/dollar down to the $1.05 area, whereas a win for Harris would see the rate move in the opposite direction, above $1.15,” said BlueBay Asset Management CIO Mark Dowding.

Geopolitical risks, especially in the Middle East, that trigger a surge in oil prices and hurt economic growth, also make the euro vulnerable, analysts said.

ING added that a Trump win could also hurt the Australian and New Zealand dollars — currencies of economies dependent on trade from China, a main target of higher tariffs. Around 37 percent of Australia’s and 29 percent of New Zealand’s exports land in China, ING noted.

The Swedish and Norwegian currencies were also seen as vulnerable to global trade dynamics, while Canada’s dollar could suffer if a Harris win is viewed negatively for the US economy.

China Roulette

One of the highest stakes gambles in global markets right now is whether to place bets on China, where government stimulus pledges have revived investor interest that could be cancelled out by tariff hikes or trade wars under Trump.

Investors expect Harris to pursue targeted tariffs and Trump to lean towards more aggressive, disruptive policies.

“If Trump wins, the (political) rhetoric towards Chinese companies would be terrible,” Edmond de Rothschild international equities manager Christophe Foliot said.

That would likely increase China scepticism among US investors and intensify a trend for multinationals to remove made-in-China components from their supply chains, he added.

China faces further hits from a Trump administration potentially cutting Chinese companies’ access to new technologies, which would limit productivity, Oxford Economics said.

And risk consultancy Eurasia Group said a Trump victory would pressure EU nations to also decouple from China.

Goldman Sachs strategists estimate that Chinese stocks could fall by 13 percent if Trump levies a 60 percent tariff on Chinese goods.

But threats of an export slump may also motivate Beijing to follow up monetary stimulus with more significant state spending programmes.

“Potential new US tariffs on Chinese goods might increase the intensity and longevity (of stimulus),” Goldman said.

EM on the Line

Emerging market equities are, on paper, ready to shine after underperforming their developed-world peers for the better part of a decade. The US Federal Reserve has kicked off rate cuts and the dollar, food and fuel prices are falling – big boosts for importing countries.

Investors say that a Harris win, signalling broad policy continuity from President Joe Biden, could give the assets a tailwind.

But a Trump win, accompanied by global tariffs, could come down hard on any excessive optimism. Most investors say Mexico, with strong US trade ties, has the most to lose; those betting on a Trump win often turn on Mexico’s peso.

JPMorgan warned investors to stay neutral until the US election risk has passed, and UBS warned that the highest Trump tariffs threaten losses of up to 11 percent for EM equities in 2025.

The Swiss bank also said that its EM Risk Appetite index is near 15-year highs, suggesting investors are not fully pricing in the downside risk of Trump tariffs to EM assets broadly.

Reporting by Libby George, Naomi Rovnick and Dhara Ranasinghe and Danilo Masoni; Editing by Frances Kerry