Washington Watch: economic impact of a Trump vs. Harris presidency

Deficits will increase under Kamala Harris or Donald Trump – and the differences between the two are not expected to be very significant due to the narrow congressional majorities they will likely face.

What appears to be one of the closest presidential races in modern history is finally coming to an end. As of Monday morning, nearly half (48%) of the 2020 electorate (~155 million people) have already voted early (in person or by mail). Depending on Election Day turnout, 2024 could become one of the highest turnout elections in history.

POTENTIAL ECONOMIC IMPACT OF CANDIDATES’ POLICIES:

We believe there are, in many ways, fewer differences between the candidates than the market assumes, specifically:

1. deficits will increase under Kamala Harris or Donald Trump – and the differences between the two are not expected to be very significant due to the narrow congressional majorities they will likely face.
2. both candidates will need to address taxes in 2025 due to the expiration of the Trump Tax Cuts and Jobs Act tax cuts, and it is likely that most, if not all, of those cuts will be extended.
3. both candidates will continue to take a tough stance on China.
4. the Fed will remain independent thanks to institutional safeguards and the absence of current vacancies (despite some verbal pressure which could increase if Trump wins).

The main differences will be:

1. tariffs, which will likely remain high under Harris on China but could rise even further under Trump, with other countries also likely to see increased tariff pressures.
2. immigration, although some measures Trump is considering largely require congressional approval.
3. regulation, where Trump is expected to take a lighter approach (it should be noted that it is difficult to reverse regulation, although there is more regulatory certainty under Trump due to the absence of new regulations and the repeal of certain Biden executive orders).

When it comes to the overall economic impact of each candidate’s policies, there are positives and negatives for each.
However, for Trump, given the president’s unilateral authority over tariffs, there are higher risks to both inflation and growth when it comes to tariffs.

Remember that policies will really depend on Congress and those in charge.