Goldman Sachs: Trump tax cuts, deregulation will boost growth; tariffs could be a drag

goldman sachs Last week, U.S. and global economic forecasts predicting the impact of President-elect Trump's victory on the economy in 2025 showed that tax cuts planned by the incoming administration would boost growth, but more aggressive tariffs would have an impact. It was found that there is a possibility of weakening the

Goldman Sachs economists led by Jan Hadzius predicted the U.S. economy would grow about 2.5% in 2025, based on baseline projections. trump administration It will bring new tax cuts, deregulation, immigration cuts and even higher tariffs on Chinese goods and imported cars.

Their basic plan does not include a 10% tariff on all imports or a deportation program that President Trump campaigned on, but both could have the effect of curbing economic growth if implemented. .

“We think there are some offsetting effects: negative effects from tariffs and immigration, positive effects from fiscal policy and regulatory changes. It won't have a huge effect,” Hazzius said at a press conference. Friday.

The Fed's preferred inflation measure showed that price increases continued to slow in September.

He said he expects the Trump administration to implement tariff policies relatively quickly, with the biggest impact coming in 2025. tax reduction And spending reforms will take time and are unlikely to have significant effects until 2025 and 2026.

This move resulted in a net negative impact on GDP growth of 0.2 percentage points in 2025 and a marginal positive impact of 0.3 percentage points in 2026.

“These numbers are not very significant and do not significantly change the general direction of our outlook, which remains optimistic,” Hatzius said. “Our growth rate has been above consensus for the past several years and remains well above consensus for 2025. Average annual GDP growth of 2.5% is just over half a percentage point above the latest Bloomberg consensus. ”

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Hadsius went on to explain that the Trump administration's anticipated tariffs could cause inflation to remain slightly higher than without the tariffs, even if the disinflationary trend continues.

” china tariffs What really matters here is that this is the most direct inflationary effect, worth 0.3 to 0.4 percentage points in our estimates. “If auto tariffs are included, it will be 0.4, so we have lowered our forecast for core PCE inflation by the end of next year from 2.0% to 2.4%.”

He added that it was 2.4%. PCE inflation That would be lower than the current core PCE inflation rate of 2.7%, but higher than the 2.0% it would be without tariff increases. Labor market rebalancing and its impact on wage growth and labor costs, as well as the suppression of housing cost inflation, were the main drivers of the disinflationary trend.

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Given these inflation forecasts, Goldman Sachs: federal reserve system The plan is to cut the benchmark federal rate by 25 basis points over the next three meetings, before moving to a more gradual pace of rate cuts starting in mid-2025, eventually reaching a range of 3.25-3.5%. .

“One thing I am very clear about and feel strongly about is that in an environment where we expect inflation to return to 2%, the current 4.5% to 4.75% fund rate remains a fairly high fund rate. “Probably not in 2025, but after that,” Hadzius said.

Goldman Sachs expects the Federal Reserve and Chairman Jerome Powell to continue lowering rates over the next few meetings, before slowing the pace in mid-2025. (Ting Sheng/Bloomberg via Getty Images/Getty Images)

The next Trump administration Flat rate of 10% tariffThe report predicts that growth will slow by 1 percentage point on average in 2026, peaking at 1.2 percentage points, but drop to 0.8 percentage points if customs revenues are fully recycled into tax cuts.

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“The biggest risk we are focused on is a flat rate tariff…and if we were to achieve a flat rate of 10%, the tariff increase would work just like a consumption tax, so it would take an even bigger chunk out of household real disposable income. “In effect,'' Hadzius said, pointing out that it would not only be negative, but would cause a tightening of the fiscal situation, further increasing the negative impulse.

“While there is a lot of uncertainty in the policy environment, we believe the drag on growth will be even greater and core PCE inflation will rise even more significantly. Our baseline is 2.4% by the end of next year, but if “If we add larger tariffs on top of that, we would expect it to be around 3% by the end of next year, probably a little over 3%,” he added.

Goldman Sachs said higher tariffs could cause inflation to remain higher than without them. (Photo by Qian Weizhong/VCG, Getty Images/Getty Images)

Goldman Sachs' analysis also takes into account deportations. unauthorized immigration It would include selective deportation of up to 1.2 million undocumented immigrants with criminal records or widespread deportation of up to 2.1 million people.

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Mr. Hadsius is President Trump's campaign rhetoric The country is estimated to have between 12 million and 15 million illegal immigrants, suggesting it intends to pursue mass deportations, which would result in greater workforce growth and GDP growth. The company said it expects the rhetoric to be inconsistent with reality.

“Our best guess is that the reality falls short of some of the campaign rhetoric.Many of these immigrants work in many countries, and there is no real response to mass deportations. , we expect to see quite a bit of resistance in some ways,'' including many small and medium-sized businesses across the United States,'' Hadsius said. “The labor market is still very tight and it's not that easy to find a replacement, so I think that will also be a factor.”