The current election cycle has been one of the most remarkable in memory, involving a criminal conviction and assassination attempts, as well as the late replacement of the sitting president in the campaign. In case anyone has forgotten, the contest also involves substantial policy differences across a range of areas. Recently, Joseph V. Amato, Neuberger Berman President and Chief Investment Officer—Equities, interviewed three of our senior equity research analysts, Daniel Flax, Ronald B. Silvestri and Terri L. Towers, PhD, who focus on technology, clean energy and health care, respectively, regarding a few key issues where the election may or may not make a difference. We provide some highlights below.

Trade and Tariffs

Joe: Former President Donald Trump has talked about imposing 60% tariffs on Chinese imports and 10% tariffs across the board on other imports, which could bring tariff revenue to unprecedented levels—perhaps 1% to 2% of GDP (all else equal) compared to 0.3% – 0.5% over the past century. Vice President Kamala Harris may employ them to more a limited degree. How do you see the tariff issue for the areas you cover?

Dan: Higher tariffs would obviously have an impact on technology, and the industry has been dealing with them for many years now. But if we step back and look ahead to where the tech sector is going, it's really about incorporating more artificial intelligence into solutions, with implications across all industries, and even the political, social, military and geopolitical spheres. Those are going to be dramatic, regardless of how high tariffs may or may not be—and regardless of who wins the election.

Ron: Support for tariffs on clean energy imports, like solar modules, is broadly bipartisan. But it’s important to note that U.S. companies have adapted, with reshoring in the U.S. to build our own clean energy supply chain. That ecosystem will drive more job creation and support the clean energy mega-theme in this country for years to come. Keep in mind that renewables are still only 15% of the U.S. fuel mix. I believe clean energy remains a compelling growth engine to meet ever-increasing power demand, including from AI and data centers. So, tariffs will remain, but more renewables will be needed to accommodate accelerating power demand, no matter which party is in power.

Terri: When we think about China, the areas most exposed to trade tensions are biotech and pharma manufacturers, as well as generic manufacturers. Both candidates are aligned in using escalating tariffs as part of the conflict with China. Although the incentive structures they use may be different, the end game is the same: to get more manufacturing out of China and back to the U.S.

This isn't a new theme. It was highlighted in 2021, at the height of the pandemic, when President Biden came out with a list of key assets that were mission-critical to the nation, including active pharmaceutical ingredients (API). We dug a little deeper to see just how big this reliance was, finding that about 30% to 35% of API is directly dependent on China in our estimation. In addition, China is the predominant supplier of API to the Indian generics industry, upon which our own generic market relies heavily. In sum, as much as 50% to 60% of API is likely directly or indirectly coming out of China.

Corporate Taxes

Joe: Unfortunately, the candidates aren’t talking about long-term debt sustainability, but rather, focusing on short-term tax policy. Harris has proposed increasing the corporate tax rate to 28%, while Trump has discussed reducing it to 15% for companies that manufacture products in the U.S. A common rule of thumb is that a 1% increase in the corporate rate roughly equates to a 1% decrease in S&P 500 earnings. So, this has important implications for growth.

Terri: In health care, the impact of tax changes will generally depend on what subsector you are talking about. More U.S.-centric businesses, like managed care companies, clinical labs or distributors, already have high effective tax rates of typically 23% to 26%. As president, Harris might take that to 28%—clearly a headwind, but something that is manageable. Looking at the broader health care sector, including multinational, pharmaceutical and biotech companies, as well as medical device companies, their effective tax rate generally ranges from the low to high teens. And so, a rate reduction to 15% under a Trump White House scenario probably won’t matter for them, because they already employ methods like offshoring intellectual property and often use corporate inversions that allow them to limit tax exposure even during higher tax regimes, which could be the case with a Harris White House.

Dan: A lot of the tech sector is global. If you think about semiconductor companies, most of them rely on partners that are located overseas. And even where there are tax incentives to reshore, I'm not sure that it will have a big impact. What the market looks for in technology companies is innovative solutions and growth potential. If their earnings are a little bit higher or lower due to the tax rate, the market will likely overlook that if their topline growth is durable.

Industrial Policy and Regulation

Joe: Among Joe Biden’s signature achievements are the CHIPS Act, which seeks to restore the domestic semiconductor industry, and the Inflation Reduction Act (IRA), which introduced an array of subsidies to bolster clean energy. How do you view them in the context of the current political environment?

Dan: Over the last several decades, more and more manufacturing has moved to Asia because of lower costs and the incentives there. I think the CHIPS Act is an interesting first step to try to incentivize companies to do more here in the United States. However, given the size of the investments required, I think you would need several initiatives like the CHIPS Act, through multiple administrations, to make a difference. That doesn’t mean just money. You also need policies to help attract the right skillsets, for example in data science or artificial intelligence. There is support across the aisle for such efforts, given the interest in building more reliable supply chains.

Ron: The IRA has really turbocharged clean energy growth. Thus far, over 300 major clean energy projects have been announced across the U.S. since the legislation was passed, involving over $200 billion in capital investment for these projects and over 300,000 new jobs created.

In my view, a Republican trifecta (taking the presidency, House and Senate) would be needed to meaningfully change the IRA, but there are growing calls within the GOP to keep the law in place in order to ensure business certainty and preserve the job growth.

More broadly, I think there’s support for multiple energy sources, which will be needed to meet surging power demand. Natural gas is commonly understood to be vital to energy security and electrical grid reliability. A Trump win could be positive for sentiment related to traditional oil and gas policies, while Vice President Harris has walked back her opposition to fracking as well. More controversially, nuclear power enjoys bipartisan support, and the IRA included the first-ever federal tax credit for nuclear power. Nuclear has some risks, but it is also an ideal zero-carbon resource for power that is experiencing increased momentum.

Finally, the slow permitting process has been a major obstacle to building out energy infrastructure. Wind and solar facilities may take a couple years to construct, natural gas up to five years, and a new nuclear facility could take 10 years or more. I think that legislators will focus on this issue once the election has been decided.

Joe: The IRA contained a number of reforms to the health care sector. How do you believe those could be affected by the election?

Terri: For health care companies, we believe the important pieces are the Medicare Part D redesign and drug price negotiation by the government, which pharma and biotech companies are particularly exposed to. Harris, who was instrumental in crafting the IRA, is highly supportive of negotiation and may attempt to either accelerate or broaden the number of drugs included on the list for negotiation with manufacturers.

Should Trump be elected, I think the odds of a “repeal and replace” à la the Affordable Care Act are low, and that we will still see direct drug-price negotiation as both candidates support direct government involvement. If anything, Trump may bring back the “most favored nation” approach to calculating the negotiated rates of reimbursement by Medicare in the U.S. for certain Part D drugs; however, his campaign seems to be stepping back from this as of late.

Part D redesign focuses on the segment of Medicare insurance for seniors that governs drug coverage, and limits the patient out-of-pocket amount to $2,000 per year. This portion of the IRA is not controversial and has the support of the industry and both parties in Congress. Without “sticker shock” at the pharmacy counter, seniors should feel less reluctant to abandon their medicines, which should translate into increased volumes for pharmaceutical companies as well as better health outcomes, which should also help results at managed care companies. So, we think the Part D element of the IRA is solid policy and is here to stay, regardless of who wins the election.

Tech: Antitrust and AI

Joe: Tech companies are already a key focus for regulators. Do you see that continuing?

Dan: Given the size of the major platforms, the number of industries they're going into, their use of data and their impact on competition, I think that antitrust scrutiny, which is already high, will keep increasing.

Here in the U.S., regulators are trying to ensure that these companies can innovate, but also allow others to compete. The push and pull is likely to continue through the election, and beyond. In Europe, where you generally don't have these technology giants headquartered, it’s a little different. In some cases, the European Union wants to assert oversight out of concern about data usage.

AI is also a key issue, as the technology has great potential to drive productivity, growth and jobs across the economy, and it also has military and geopolitical implications. Governments know that if they impair their own companies, then the “champions” in other countries may outcompete their companies and take share. So, there’s a balance to be achieved.