The US dollar is jittery ahead of a big week, and there's more to it than the presidential election

Markets are cautiously awaiting results from the US presidential election.

Chris duMond; Chip Somodevilla/Getty Images; Alyssa Powell/BI

• Markets are bracing for the US presidential election amid a tight race between Vice President Harris and former President Donald Trump.
• The US dollar is in firm focus as traders tread cautiously ahead of the polls.
• The Fed's FOMC meeting and a potential fresh round of stimulus from China could also influence markets this week.

Markets are holding their breath at the start of a big week.

The US presidential election on Tuesday is the biggest event this week, and traders are firmly focused on a jittery dollar on Monday amid a tight race between Vice President Kamala Harris and former President Donald Trump.

On Monday, the US Dollar Index — which measures the greenback against a basket of six major currencies — was 0.5% lower at 3:27 a.m. ET.

Meanwhile, the US dollar was 0.6% lower against the Japanese yen and the euro was 0.5% higher than the dollar.

The dollar lost ground after weekend polls showed the odds of a Republican sweep falling, and the likelihood of a Democratic win with a split Congress increasing, Tony Sycamore, a market analyst at trading platform IG, wrote on Monday.

Polls that show Trump's odds falling would put pressure on the dollar. This is because Trump, the Republican candidate, has pledged to impose wide-sweeping tariffs on imports, which would stem currency outflow and drive up inflation and interest rates — which would support the greenback.

"This shift has weighed on the US dollar, as traders unwind some of the 'USD Trump Trade' premium," wrote Sycamore, referring to the weekend poll.

Cash trade in US Treasuries trade was closed in Asian trading hours as markets in Japan were closed for a public holiday.

Fed meeting and China stimulus

The US elections aren't all that's influencing the markets this week.

The US Federal Reserve is also set to hold its interest rate-setting meeting on Wednesday and Thursday.

Regardless of who wins the election, the Fed is expected to cut key rates by 25 basis points, according to a Reuters poll of 111 economists.

Factors driving the potential cut include Friday's jobs data, which showed the US economy added just 12,000 jobs in October — far lower than the forecast of 106,000 jobs. Meanwhile, inflation has cooled over the last few months.

"The Fed is more relaxed about inflation and is putting more focus on the jobs market as it attempts to secure a soft landing for the economy," analysts at ING wrote in a note on Friday.

Since Joe Biden will still be president until January 20, macro newsflow would still drive the Fed's interest rate decisions until December, the ING analysts added.

On the other side of the world, China is expected to greenlight a fresh round of stimulus as its Standing Committee of National People's Congress — its top legislative body — meets from Monday through Friday.

The world's second-largest economy has been mired in a prolonged economic downturn amid an epic property crisis. In late September, it announced aggressive stimulus to boost its economy, but analysts say much more is needed to drive flagging consumption.

This week, China's legislative body would be considering a plan to raise $1.4 trillion in extra debt over the next few years to fund a part of an economic rescue package, Reuters reported on Tuesday, citing two sources with knowledge of the matter.

The amount could be increased if Trump wins the presidential race, underscoring the outsized influence of the US election on the rest of the world.

"US election outcomes and the resulting tariff risks are consequential to China equity via the intertwined economic, currency, policy, earnings, and valuation channels," Goldman Sachs analysts wrote on Monday.

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Quincy Jones, legendary record producer, dead at 91

Quincy Jones died in his home in Bel Air.

Greg Doherty/Getty Images for Entertainment Studios

• Quincy Jones, 91, died in his home in Bel Air on Sunday night.
• Jones is best known for producing Michael Jackson's early albums and has won 28 Grammy Awards.
• The cause of his death has not been confirmed.

Quincy Jones died at 91 in his home in Bel Air, his publicist, Arnold Robinson, confirmed in a statement shared with Business Insider.

Jones, a 28-time Grammy Award winner, was best known for producing Michael Jackson's best-selling album, "Thriller." In his seven-decade career, he collaborated with Frank Sinatra, Aretha Franklin, and Betty Carter, among others.

He was surrounded by his children, his siblings, and close family at the time of his death, Robinson said.

"Tonight, with full but broken hearts, we must share the news of our father and brother Quincy Jones' passing. And although this is an incredible loss for our family, we celebrate the great life that he lived and know there will never be another like him. He is truly one of a kind and we will miss him dearly; we take comfort and immense pride in knowing that the love and joy, that were the essence of his being, was shared with the world through all that he created. Through his music and his boundless love, Quincy Jones' heart will beat for eternity," the statement read.

His family requested privacy during this time of mourning and asked that donations be made to The Jazz Foundation of America in lieu of flowers.

This is a breaking story. Please check back for updates.

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The US presidential election is 2 days away. Here's where things stand.

Election Day is almost upon us.

Tom Williams/CQ-Roll Call, Inc via Getty Images; Anna Moneymaker/Getty Images

• Election Day is just two days away.
• Harris and Trump are campaigning in swing states as they make their final appeals to voters.
• Results could reveal a historic gender gap, with the economy and abortion being major issues.

With Election Day on Tuesday, the end is in sight for what has been a contentious US presidential race between Vice President Kamala Harris and former President Donald Trump.

More than 68 million Americans have already cast their ballots, a stunning figure that demonstrates the high interest and high stakes in a contest that has had more twists and turns than any presidential contest in recent memory.

Throughout the campaign, Trump has benefited from unease over the economy, a consistently top issue for voters. When President Joe Biden was the presumptive Democratic nominee, it was his biggest vulnerability, despite low unemployment and consistent job gains after the height of the COVID-19 pandemic.

Inflation has been driving much of the voter anxiety about the economy. Although wages have increased in recent years, higher prices have affected the finances of millions.

After Biden stepped aside as the nominee in July and Harris became the Democratic Party standard bearer, she immediately focused on the issue, vowing to attack price gouging and unveiling a broad economic plan of her own.

It wasn't long before Harris began to narrow the gap between the Democrats and the GOP in the presidential race.

Now, in its final days, the race remains tight, with both candidates virtually tied in the swing states as they make their last appeals to voters.

The battleground states remain close

Harris' clearest path to reach 270 electoral votes — and an overall victory — is to sweep every Democratic stronghold and blue-leaning state while also winning Michigan, Pennsylvania, Wisconsin, and Nebraska's 2nd Congressional District.

Vice President Kamala Harris has been a frequent presence in Michigan, a state critical to her electoral path.

Brandon Bell/Getty Images

Michigan, Pennsylvania, and Wisconsin form a critical core of the "blue wall" of states that backed Democratic presidential nominees from 1992 until 2012, but have more recently been less reliable for Democrats.

The three states — which both Harris and Trump have crisscrossed in their hunt for votes — contain urban, suburban, and rural areas that will be key for each candidate in the race.

(Pennsylvania offers 19 electoral votes, while Michigan has 15, and Wisconsin has 10. Nebraska's 2nd offers one vote, which could be decisive for Harris.)

In 2016, Trump breached the blue wall, winning all three states by making inroads with working-class voters that had previously supported former President Barack Obama, including a critical bloc of independents and union workers.

But in 2020, Biden flipped the blue wall states back into the Democratic column, but only narrowly. That year, Biden also won Nebraska's Omaha-anchored 2nd District, and recent polling suggests that Harris may, in fact, also hold an advantage there.

Harris has directed much of her energy on these states, where she'll need to perform well to counter Trump's stronger standing in the Sun Belt.

The Sun Belt states

Trump appeared favored to win Arizona, Georgia, Nevada, and North Carolina when he was running against Biden. But Harris' candidacy activated young and minority voters who were unenthusiastic about Biden, allowing her to broaden the Democratic map.

As a result, the Sun Belt states remain competitive. Republicans appear to have built an early-vote advantage in Nevada. However, Election Day turnout and the direction of the remaining mail-in ballots remain anyone's guess.

Voters in the Sun Belt have been focused on the economy and immigration, two issues that benefit Trump. But Harris has managed to cut into Trump's edge on economic issues while also polling strongly on issues like abortion, democracy, and supporting the middle class.

We could see a historic gender gap

Shortly before Biden left the race, he held a small advantage with women, while Trump fared much better with male voters.

However, with Harris as the Democratic nominee — and the potential for the United States to elect its first-ever female president — the country will likely see a historically large gender gap once all the votes are counted.

Former President Donald Trump has a wide advantage with male voters.

ANGELA WEISS/AFP via Getty Images

Harris' robust female stems, in part, from abortion rights.

The Supreme Court in 2022 overturned Roe v. Wade, sending the issue of abortion back to the states. Now, millions of women live in states with near-total abortion bans, while millions of other women live in states where abortion rights have been strengthened.

In the closing days of the race, Harris has heavily emphasized the issue, which also helped Democrats in the 2022 midterms.

Meanwhile, Trump has appeared on podcasts that appeal to conservative-leaning male listeners and seems to have attracted some significant support from young Black and Latino men, according to polling.

The huge gender gap is illustrated in a recent top-rated national poll.

A late October New York Times/Siena College survey of likely voters showed Trump ahead of Harris by 14 points among men (55% to 41%), while Harris held a 12-point edge over Trump (54% to 42%) with women. Overall, the survey showed the race tied, with the candidates each earning 48% support from respondents.

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A US invasion of Taiwan in WWII would have been a disaster. A Chinese operation faces similar dangers.

Taiwan still uses Imperial Japanese facilities and is influenced by its defensive strategies. Here, an M60A3 tank fires during a Taiwanese exercise.

Daniel Ceng/Anadolu via Getty Images

• The US considered invading Japanese-occupied Taiwan in World War II.
• Top US commanders decided it would be a high-casualty nightmare.
• Chinese invaders today could face similar challenges.

The US once planned an invasion and seizure of Taiwan that would have been as big as D-Day.

Operation Causeway would send hundreds of thousands of troops, supported by thousands of ships and aircraft, to storm the beaches of the Japanese-occupied territory in 1945.

"Almost certainly, the invasion would have been a horrific spectacle and nightmarish ordeal," said Ian Easton, an analyst who authored a new study on the invasion for the China Maritime Studies Institute. "Far worse than any battle that was actually fought in the Pacific. The campaign would have been protracted and might have taken six months or even a year."

The CMSI study makes clear that a US invasion of Taiwan in 1945 — or a Chinese invasion today — would be difficult and risky.

Like many years ago, today's Taiwan would likely wield Japanese fortifications and tactics to defeat a large Chinese amphibious assault — illustrating the risks and dangers of any attempt to seize the island that Beijing views as a breakaway province.

Battleship USS Tennessee bombards Okinawa while tracked landing vehicles carry troops to the invasion beaches. An invasion force for Taiwan would likely have had to be much larger.

HUM Images/Universal Images Group via Getty Images

'A long, drawn-out fight'

The genesis of the planned American invasion — eventually codenamed Operation Causeway — began in the late 1920s as the US Navy and Army crafted a strategy for a potential war with Japan. War Plan Orange envisaged an advance across the Pacific that would culminate with an assault on Taiwan — then called Formosa — which the Japanese Empire annexed from China in 1895 after the First Sino-Japanese War. The plan called for 90,000 Army and Marine personnel to capture Taiwan, which would turn the island into a staging point for an invasion of Japan. By the 1930s, Taiwan was discarded in favor of seizing Okinawa, a smaller objective closer to the four largest Japanese islands.

In 1944, with Japan crumbling and an invasion of the Japanese mainland appearing likely, American planners again eyed Taiwan as an amphibious staging point and a base for B-29 Superfortress strategic bombers. Navy Chief Adm. Ernest King favored the Taiwan option, while Gen. Douglas MacArthur lobbied for an invasion of the Philippines. For a time, "General MacArthur's return to the Philippines was viewed as a secondary and supporting campaign," the CMSI study said.

Initial plans called for a 12-division assault in early 1945. But with the European theater receiving priority for American forces, this was scaled down to six divisions (about the size of the initial assault force in the Normandy invasion). The objective would be to occupy southern Taiwan and the mainland Chinese port of Xiamen across the Taiwan Strait.

But this meant subduing a heavily defended island of 14,000 square miles studded with cities, mountains, and forests. The more they studied the challenges, the more worried some senior officers became. Just finding sufficient forces would be a nightmare. "In total, it was believed that a force of 776,913 would be needed for Causeway, including all six divisions of the US Marine Corps, 20 B-29 bomber groups, 41 miscellaneous bomber squadrons, 40 fighter squadrons, and large numbers of naval engineers and logistics support units," explained the CMSI report.

The biggest flaw in Operation Causeway was an underestimation of Japanese defenses. Intelligence assessments expected a garrison of 90,000 to 170,000 troops. In fact, the Japanese had 275,000 troops, including conscripted Taiwanese natives. They were backed by 20 squadrons of kamikaze aircraft and 600 suicide boats.

The Japanese had anticipated the landings would be in southern Taiwan. They planted 10,000 sea mines, including 5,200 in the Taiwan Strait alone. Mindful of overwhelming American firepower, they built elaborate systems of trenches, bunkers, and tunnels above the beaches and across the island.

"Imperial Japanese and Formosan troops would have conducted a long, drawn-out fight in the cities and mountains," said Easton. "A guerilla warfare campaign was planned for after the conventional fighting came to an end. Taiwan's defenders were determined to fight to the bitter end, and the defensive geography, stockpiles, and underground bunkers they had were extraordinary."

How would a US invasion of Taiwan fare? Other Pacific War battles offer grim clues. When American troops landed in the Philippines in October 1944, they slogged through jungles and mountains in a campaign that still hadn't ended when Japan surrendered in August 1945. In the April 1945 invasion of the island of Okinawa, US forces suffered 50,000 casualties in two months, as they confronted dense fortifications in hilly terrain, as well as 2,000 kamikaze aircraft attacks that sunk or damaged hundreds of Navy ships.

In the end, the Taiwan idea was abandoned. "From the military view, it was absolutely the right decision," Easton said. "Professional war planners detested the idea of having to fight on Taiwan, and with good reason."

US troops suffered 50,000 casualties in two months of hard fighting in the Okinawa invasion.

AFP via Getty Images

Lessons for China

Even eight decades after the Japanese occupation ended, Taiwan's military is still influenced by Japanese doctrine, such as the importance of hardening airbases, and how to confront an amphibious invader armed with massive air and naval firepower.

Taiwanese forces still use Japanese-built facilities, including some bunker complexes. Some Taiwanese officers advocate renovating old beach defenses, and preparing for protracted guerilla war as the Japanese did.

China would face these challenges and more in trying to seize Taiwan today.

"Taiwanese military officers pay close attention to history, and especially the history of island warfare, urban warfare, and amphibious warfare," said Easton. "They have all the defensive benefits that the Imperial Japanese enjoyed and more, thanks to modern weaponry and strong American support."

Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds an MA in political science from Rutgers Univ. Follow him on Twitter and LinkedIn.

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This tactic to avoid income taxes without moving to Florida could surge thanks to a 'silver tsunami'

Rich entrepreneurs can use an ING trust to save on income tax without leaving high-tax states.

Ivan Rodriguez Alba

• Uber-rich business owners in high-tax states can save on income taxes without moving.
• Instead of selling their businesses outright, they put their stock in a trust in a tax-haven state.
• Incomplete non-grantor trusts come with strings attached but can pay off nicely.

Top earners continue to flock to states with little to no income tax such as Florida and Texas. It's an especially smart move if you're about to sell a business. As for rich entrepreneurs who aren't ready to make a move, they can still save on taxes with the right lawyer.

By creating a special kind of trust, business owners can take advantage of the loose tax laws of other states. Instead of selling a business outright, they transfer their shares to an incomplete non-grantor trust set up in a tax-haven state such as Nevada. When the shares are sold, the trust collects the proceeds without paying any state income or capital-gains taxes. The trust assets grow free of those taxes and are shielded from creditors.

Dan Griffith of Huntington Bank expects ING trusts will surge in popularity with dealmaking on the rebound coinciding with a "silver tsunami."

"You've got baby-boomer business owners who need to transition, and you also have a ton of capital on the sidelines looking for transactions," Griffith, Huntington's director of wealth strategy, said. "With more deals comes more need for tax-saving strategies."

Investors can also benefit from putting their portfolios in ING trusts because that allows the dividends to grow free of state taxes. ING trusts are powerful tax-avoidance tools, so much so that New York and California have enacted laws to render them useless for state residents. California closed the loophole in 2023, estimating it would increase tax revenue by $30 million that year and $17 million each following year.

Each state also has its own provisions to navigate, which makes setting up INGs cumbersome. However, Bank of America's Timothy Herbst said it could still be worth it in states without sky-high income-tax rates.

"That trust can grow conceivably without any state income tax," the wealth-strategy executive said. "That's a significant savings even in a state like North Carolina at 4.5%. It's not necessarily a huge income tax, but you look at a very large portfolio growing over decades, that can be real significant savings."

Here is how ING trusts work

ING trusts come in different flavors. Nevada and Delaware are popular states for domiciling ING trusts, where they're referred to as "NINGs" and "DINGs," respectively. However, Wyoming and South Dakota are also options as they do not tax trust income or capital gains and protect trust assets from creditors.

The person who creates the trust, otherwise known as the settlor, does not have to reside in that state, but the trust should be administered by a third party who does.

Here's an example of how an ING trust can work.

Consider a business owner in Oregon looking to sell a business worth $50 million that was worth barely $1 million when it was founded. Oregon taxes income and capital gains at 9.9% for top earners. If the owner sold their shares outright, they would be on the hook for $4.8 million in taxes. Instead, they transfer their shares to an ING trust in Nevada. When the business is sold, the trust is spared those income taxes. The remainder, after federal capital-gains taxes, can be invested and grow free of state and local taxes.

ING trusts are still subject to federal capital gains taxes, but the ultrawealthy users of INGs would likely be subject to that burden anyway. For a centimillionaire, it's not hard to reach the top rate of 37%, which applies to incomes above $578,126.

"These are superrich people," Bob Lord, a senior advisor on tax policy for the Patriotic Millionaires, said. "They're still taking in enough to get to the 37% bracket."

Furthermore, INGs can be used to take advantage of a tax perk for early shareholders that exempts at least $10 million in profits from the federal capital-gains tax. Steve Oshins, a Nevada lawyer, said founders could double their exemption by setting up an ING trust.

"This trust can serve as a second taxpayer so that the individual can get a second $10 million exemption," he said. "This can apply even if they don't live in a state with a state income tax."

For the ING trust to pass muster with state authorities, there should be multiple beneficiaries in addition to the settlor and their spouse. Since beneficiaries do have to pay state income taxes — if applicable — when they receive distributions. For this reason, lawyers advise that clients take as few distributions as possible and let the assets grow in the trust for their children or future generations.

"It is usually better that the client knows that distributions won't be coming back to him or her or to their spouse," Herbst said. "If they did need those distributions, then it probably is not going to be the right strategy."

That said, sometimes taking a distribution makes sense if there is financial need or the client has moved to a low-tax state since setting up the ING trust, Oshins said.

"You just have to look at each fact pattern on its own and make the right decision," he said.

Buyer beware

1. ING trusts can't be used to avoid state taxes on salaries or rental income.

ING trusts cannot be used to defer income taxes on salaries or income from tangible assets in the state. That income, referred to as source income, is subject to state taxes.

For instance, Griffith said, an Ohio resident cannot avoid state or local taxes on income from rental properties in the state even if they transfer ownership of the properties to an ING trust in South Dakota.

For clients in states with aggressive tax authorities, Griffith recommends they step away from their business' day-to-day operations and collect a minimal salary before transferring their interests to the ING trust.

"What you really need to do is become essentially just a shareholder, be, as a business owner, somebody who says, 'I am just receiving dividends from this company. I own C-corp stock,'" he said. "In many states, that becomes non-source income."

2. Setting up an ING trust is like threading a needle.

These trusts have to be structured carefully to avoid triggering estate taxes of as much as 40% while keeping the income-tax advantages. In addition to navigating the laws in the home state and the tax-haven state, the settlor has to retain certain rights and relinquish others. For instance, the settlor can't have the ability to compel distributions but should have the right to name beneficiaries at death.

"It's inherently complicated," Griffith said. "You've got to have a fairly sizable transaction to make the juice worth the squeeze."

3. The trust has to be set up well before the business is sold.

It is easier for a state tax authority to pursue income from the sale of a business if it is done shortly after the ING trust is established. Griffith recommends at least a year's delay, but it is the biggest challenge for clients, he said.

"They're like, 'Oh, I don't want to fund the trust until we know we're going to sell.'" he said. "You have to do it in advance. And if you do, those are the ones that I've seen that have been really successful."

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Russia's defense sector is running on overdrive — but firms are warning of bankruptcy

Russia has injected billions of dollars in military spending but its military companies face mounting borrowing costs.

ALEXANDER NEMENOV/AFP via Getty Images

• Russia almost tripled its defense spending to finance its invasion of Ukraine.
• Defense firms are busy — but high inflation and interest rates past 20% have left them struggling.
• Russia may end up having to bail them out or nationalize them.

In Russia's defense sector, demand is surging — but its companies are struggling all the same.

The Kremlin is seeking ever more weapons for its attack on Ukraine.

But sky-high interest rates are leaving companies struggling to turn a profit, a prominent CEO recently said.

Sergei Chemezov, CEO of the defense conglomerate Rostec, sounded the alarm in an address to Russian senators in late October.

He said "record" interest rates were "eating up" the profit from its orders.

Debt trap

He said clients tended to pay 30%-40% of an order's value in advance, leaving the firm to borrow the rest.

That debt, he said, was so expensive that it canceled out any profit on the work.

"If we continue to work like this, then most of our enterprises will go bankrupt," he said.

A few days after he spoke, Russia's central bank hiked its main interest rate further still, from 19% to 21%.

Rostec is not alone in its predicament, economic analysts told Business Insider.

Rising interest rates and export bans were eroding Russian defense companies' profits across the board, they said, making the Russian state the only guarantor of revenues.

Sustaining the war machine

Since launching a full-scale invasion of Ukraine about two and a half years ago, the Kremlin has taken a slew of measures to keep its defense sector pumping out tanks, ammunition, drones, and missiles.

It restructured its economy to prioritize the war, imposed export bans, tapped its national wealth fund, and strengthened trade with non-Western countries.

Its defense budget soared, from $59 billion in 2022 to $109 billion in 2023.

It's heading for an estimated $140 billion in 2024, with a draft budget forecasting $145 billion for 2025.

That figure would represent 6.3% of Russian GDP, the highest share since Soviet times.

That spending has consequences, said Roman Sheremeta, an associate professor of economics at the Weatherhead School of Management at Case Western Reserve University.

"The government pumped enormous sums of money to support the war efforts," he told Business Insider. "And the Russian reserves have been almost depleted."

The liquid assets of Russia's national wealth fund dropped by almost half, from 8.9 trillion rubles (about $91 billion) before the war to 5 trillion rubles (about $51 billion) at the end of last year, Bloomberg reported in January, citing Finance Ministry data.

"The Kremlin cannot afford defense companies to go bankrupt," Sheremeta said.

A 'death spiral'

While huge defense expenditures have contributed to economic growth in Russia and averted a recession, they also fueled inflation.

When it hiked the key interest rate to 21%, Russia's central bank said its mission was to tame inflation.

In September, Russia's annual inflation rate rose to 8.6%, far above its 4% target.

Sheremeta described the situation as a "death spiral," where war spending begets more inflation, which requires more war spending.

"What is even worse for those companies," he said of the defense firms, "is that they cannot export due to sanctions and sell their weapons for US dollars or Euros."

Daniel Treisman, a professor of political science at the University of California, Los Angeles, and a research associate of the National Bureau of Economic Research, said Russia could end up with hyperinflation.

"As the budget deficit rises in the face of military costs, the need to cover part of it by printing money will drive prices ever higher, and the Central Bank will have to hike interest rates further to slow them," he said.

A crisis point — but not yet

The experts BI spoke to both said Russia could sustain its spending for a year or more before a crisis point.

Some see even more runway.

Iikka Korhonen, the head of research at the Bank of Finland Institute for Emerging Economies, said defense companies won't be allowed to go bankrupt, and would instead be restructured or bailed out.

Russia has done that before, saving indebted defense firms in 2016 during an earlier financial crisis.

If that doesn't fix the problem, "other sectors will be cut" to keep defense firms going, Korhonen said.

Julian Cooper, Professor Emeritus at the Centre for Russian and East European Studies of the University of Birmingham, made similar remarks.

"If some defense companies cannot fulfill their obligations, the Kremlin can simply nationalize them," Sheremeta said.

Konstantin Sonin, a professor at the University of Chicago Harris School of Public Policy, forecast a dark economic future ahead for Russia due in part to "borrowing" funds from the future.

In an op-ed for Project Syndicate earlier this month, Sonin wrote that massive investment in military production at the expense of key public spending programs may strengthen Putin's hand in the short term.

"But it sets a time bomb under longer-term economic development," he wrote.

"Whenever the Ukraine war ends and Russia returns to international trade (beyond raw materials), all the nationalizations of recent years will come back to haunt it," he wrote.

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JD Vance says pumping more oil will make housing cheaper. Economists say that's a stretch.

Chip Somodevilla/Getty Images; iStock; Rebecca Zisser/BI

• Both presidential campaigns have discussed ideas for cutting housing costs.
• JD Vance says a Trump administration would build more homes in part by lowering energy costs.
• Economists say lowering labor and building material costs is far more important to home building.

As rising home prices and rents squeeze households across the country, the presidential candidates are weighing in on the housing shortage.

Former President Donald Trump doesn't list housing among the top 20 priorities on his campaign website, but he and his running mate have argued that some of their top agenda items — including deporting millions of immigrants — would bring down housing costs.

In that spirit, Sen. JD Vance recently promised that a future Trump administration would build millions of homes in part by making energy cheaper. "We're going to drill, baby, drill, lower energy costs, and that's going to make it easier to build homes," he said during an October campaign stop in Nevada.

Housing policy experts and economists disagree, saying lower energy costs would not significantly boost construction or make homes cheaper.

The cost of new housing is largely determined by the availability of workers, the prices of building materials, and government regulations that limit construction. Other policies Trump has promised to enact — including hiking tariffs on a slew of foreign imports and deporting millions of immigrants — are expected to inflate housing costs by increasing the cost of key materials and worsening the labor shortage.

A spokesperson for Vance didn't immediately respond to a request for comment.

Building materials and tariffs outweigh cheaper oil

Economists say that lower electricity costs and diesel fuel prices would make certain goods and services needed to build housing somewhat cheaper. But they wouldn't dent the most significant input costs related to building, which are labor and building materials.

"I'm not saying it's immaterial," Anirban Basu, chief economist at the construction industry trade group Associated Builders and Contractors, told Business Insider. "Energy prices are significant, but they're not as significant as many other inputs."

The prices of key building materials, including lumber and structural steel, are much more consequential. "When softwood lumber prices took off during the pandemic, it really impacted apartment construction and single-family home building," Basu said.

Notably, under the Biden administration, the US has produced and exported more crude oil than ever before in the country's history, even as housing costs have soared.

Tariffs imposed by both the Trump and Biden administrations on goods like Canadian lumber aren't helping, Andrew Justus, a housing policy analyst at the Niskanen Center, a nonpartisan think tank, told Business Insider. And Trump has promised to dramatically hike tariffs if he's elected.

"When you think about what is specifically within the government's purview, as far as bringing down costs for building homes, one of the easiest things they could do is reduce the extra tax that they levy on the most basic of building materials," Justus said.

Labor costs and cutting red tape are also key

Labor costs are generally growing as a portion of overall construction costs, Basu said. This is largely a result of a national construction worker shortage, particularly among skilled workers, and lagging productivity in the industry. While labor productivity has improved in most sectors of the economy over the last half-century, US construction productivity has declined.

"If you look at a typical construction job site, it does not look that different from what it might've looked like five or six decades ago," Basu said.

Vance has also said that Trump's plan to deport millions of immigrants would lower demand for housing and, thereby, slow rising home prices and rents. But economists say immigration isn't a major reason for higher housing costs, and because such a large portion of construction workers are immigrants, mass deportations would slow home construction and push prices up.

"We just don't have the supply of construction labor that we need, and any sort of dramatic reduction in our labor would just make that even worse," Nolan Gray, a city planner and research director for California YIMBY, told Business Insider.

But the biggest obstacle to improving housing affordability is local and state regulation. Land-use laws that block denser forms of housing like duplexes or apartment buildings in favor of detached single-family homes make it harder to build cheaper housing.

"A lot of these suboptimal outcomes come from very poor zoning decisions which tend to favor downzoning of properties, as opposed to embracing density," Basu said.

The Trump campaign has said it will cut regulations that stymie building, with Vance saying they'll "stop the ridiculous regulations that make it harder for our construction companies and our workers to build homes" at the Nevada campaign stop.

But the campaign hasn't released detailed plans — and when Trump was president, he pushed to protect single-family zoning, which keeps housing more expensive. And while Vice President Kamala Harris has put forward plans to incentivize deregulation as part of her more explicit housing agenda, most land-use and building regulations are controlled by state and local governments.

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