New York.– Economists at Goldman Sachs Group Inc analyzed the potential economic implications of a Republican or Democratic victory in the November election, warning that U.S. GDP will take a hit if Donald Trump wins.
“We estimate that if Trump wins in a landslide or with divided government, the impact of tariffs and stricter immigration policy on growth would outweigh the positive fiscal boost” from maintaining most of the tax cuts, Goldman economists including Alec Phillips wrote in a note.
In that scenario, gross domestic product would experience a spike of 0.5 percentage points in the second half of next year, with the effects waning in 2026, the Goldman team estimated. They assumed a 2020 percentage-point increase in tariffs on China under Trump, along with higher tariffs on auto imports from Mexico and the European Union, and a reduction in immigration that would slow labor force growth.
If Vice President Kamala Harris wins and Democrats secure control of both chambers of Congress, “new spending and expanded middle-income tax credits would slightly offset lower investment due to higher corporate tax rates,” the Goldman economists wrote. That would result in “a very slight boost to GDP growth on average over 2025-2026.”
Harris Scenario
If Harris were to win the White House in a divided-government scenario, where Republicans control at least one chamber of Congress, “the effects of the policy changes would be small and net neutral,” Phillips and his colleagues wrote.
The Trump and Harris campaigns did not immediately respond to requests for comment on the Goldman report. With President Joe Biden already taking steps to restrict immigration, Goldman expects a Harris administration to oversee a slowdown in new arrivals to 1.5 million a year, still larger than the prepandemic average of about 1 million. A Trump administration would likely trigger a steeper slowdown, to 1.25 million or, if Republicans take Congress and increase law enforcement resources, 750,000 a year. Many economists see increased immigration as having contributed to strong U.S. job growth in recent years, in the face of high interest rates. “We estimate that immigration’s contribution to labor force growth if Harris wins would be 10,000 per month higher than if Trump wins under divided government,” and 30,000 per month higher than if Republicans sweep, the Goldman economists wrote. On trade policy, Goldman said it does not expect further tariff increases if Harris wins. Trump’s likely tariff increases on China, the EU and Mexico would trigger an inflationary surge, with a maximum impact of 30 to 40 basis points on the Fed’s preferred price gauge, the bank’s economists wrote. An additional universal 10 percent tariff, which the Republican candidate has proposed, would have a larger impact although it would take longer.
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