Goldman Sachs analysts have warned that if former President Trump were elected and able to implement his policies, the economy would perform worse.
Goldman analysts predicted that Trump's plans to crack down on immigration and impose new tariffs on Chinese goods would shave half a percentage point off gross domestic product growth in the second half of 2025, before a rebound the following year.
“If Trump wins in a landslide or takes a twisted administration, we expect the damage to growth from tariffs and tougher immigration policies to outweigh the positive effects of fiscal stimulus,” they said in an analysis on Tuesday.
Goldman predicted performance would improve if Vice President Harris took office and Democrats took control of Congress, arguing that spending plans and tax credits would “more than offset” the hit to investment from higher corporate tax rates, which Harris has proposed raising to 28%.
President Trump's signature tax cut, the Tax Cuts and Jobs Act of 2017, reduced the corporate tax rate from 35% to 21%. President Biden's latest budget proposal also proposes raising the corporate tax rate to 28%.
Goldman said in a scenario where Harris wins the presidential election and Congress is divided, policy changes would be “small” and would have a neutral impact on GDP.
“Vice President Harris has a forward-thinking vision for strengthening our economy by growing the middle class, lowering taxes, reducing costs for working families and small businesses, and creating opportunity for all Americans to get ahead. When it comes to the economy, the choice in November couldn't be clearer,” Joseph Costello, a spokesman for the Harris-Waltz campaign, said in a statement.
The Trump campaign did not immediately respond to The Hill's request for comment.
The next president may be considering changing economic conditions and different economic policies that he or she supports or opposes.
The Federal Reserve is widely expected to cut interest rates for the first time in more than five years in September. The CME Fed Watch tool gave the Fed a 57% chance of a quarter-point cut as of Wednesday.
A lackluster jobs survey released by the Labor Department on Wednesday increased the likelihood of a half-point cut, but the CME said a quarter-point cut was still more likely.
These results follow July's jobs report, which revealed the unemployment rate rose 0.2 percentage points from 4.1% to 4.3%.
The bond market yield curve is oscillating toward normalization, with 10-year yields exceeding 2-year yields. Shorter-term bonds have been more valuable than longer-term ones for the past two years, and some market commentators have warned of a recession that has yet to materialize.
