Goldman Sachs predicts that the U.S. economy could see its most substantial boost in the next two years if the Democrats, led by Kamala Harris, win the White House and Congress in the upcoming November elections. However, economists caution that the negative impact of Trump’s tariff and immigration policies on GDP would likely outweigh these potential benefits.
Goldman’s team estimated that a Harris victory will be accompanied by a rebound in foreign economic growth next year, which could help narrow the trade deficit enough to contribute 0.2 percentage points to GDP expansion. A Democratic sweep in both the Senate and House could also nudge the Federal Reserve to cut interest rates, helping subdue inflation and support consumer spending.
However, a Trump win will be accompanied by an increase in his imposed tariffs to spur domestic demand and cut imports, hurting US exports. The impact of those measures on the economy is “likely to be more pronounced than in the scenario with a Harris victory,” Goldman’s economists, led by Alec Phillips, wrote. Gross domestic product would take a peak hit of 0.5 percentage points in the second half of next year, with effects waning by 2026. They estimated that the damage would outweigh the positive impact of retaining most tax cuts.
The US central bank is widely expected to cut rates soon as inflation slows and the Fed’s balance sheet shrinks. A rate cut, which the Fed’s chairwoman Jerome Powell has signaled will be possible, would likely push GDP up by 0.3 percent in 2024.
As the election approaches, the Democratic campaign has stepped up efforts to highlight Harris’ economic credentials. Polling suggests she is closing the gap with Trump on pocketbook issues such as elevated inflation and illegal immigration. The party’s ‘Frontline’ program has accelerated its work in vulnerable districts, and internal data shows it’s making inroads in places like Georgia and North Carolina.
In Leland, a booming North Carolina coastal community, Harris attracts voters who were attracted to Joe Biden’s message on economics but are now wary of elevated inflation and higher interest rates. ‘I’m leaning toward Harris right now,’ real estate developer Barry Meyer, 60, said in an interview, adding that he had grown more comfortable with her since she joined the race.
Reuters’s Adam Shuman and David Mercer contributed to this report.
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