U.S. Economic Growth Forecast

LONDON (Reuters) – U.S. economic growth is expected to receive a significant boost over the next two years if Democrats, led by Kamala Harris, win the upcoming elections. This insight comes from Goldman Sachs’ analysis.

Economic Impact of Potential Outcomes

• Democrat Win: Economic output is likely to improve, coupled with stronger job growth compared to a Republican-led government.

• Republican Sweep: Should Trump lead a Republican sweep or operate under a divided government, economic output may suffer in 2024 due to increased tariffs and stricter immigration policies.

Importance of the Election

The upcoming election sees a competitive race between Harris and Trump, with Harris currently holding a slight lead in national polls and critical battleground states.

Key Predictions by Goldman Sachs

• If Trump wins, the negative impact on growth from tariffs and immigration policies could result in a peak GDP growth decline of -0.5% in the second half of 2025, easing in 2026.
• A Democrat victory would see new spending and expanded middle-income tax credits, mildly boosting GDP growth despite reduced investment from higher corporate taxes.

Job Growth Comparison

• Goldman Sachs predicts job creation under Harris to be
  • 10,000/month higher than under Trump in a divided government.
  • 30,000/month higher than under a Republican sweep.

Potential Tariff Implications

A Trump victory may lead to increased tariffs on auto imports from China, Mexico, and the EU, driving core inflation higher.