Welcome to the fifth and final day of our series of blogs investigating the potential economic impacts of the US Presidential election. As one of the world’s largest economies, the outcome of the elections on Tuesday 5 November could have far reaching implications for the world economy and international financial markets.
To help you understand these implications, AFH’s Chief Chief Economist, Colin Warren, has been looking at some of the key policy proposals of Donald Trump and Kamala Harris, and the potential economic consequences.
So far this week, Colin has considered trade, tax, immigration and regulation, all of which can be read by following the relevant link. Today he finishes the weeklong and insightful series of blogs by at how much disruption each Presidential hopeful could bring to the US economy and the financial markets.
The current Vice President is the ‘continuity candidate’
As we have seen during this week’s blogs, there are stark differences between the economic policy proposals of Donald Trump and Kamala Harris. Current Vice President, Kamala Harris represents the ‘continuity candidate’ while a Trump presidency could see dramatic policy changes in certain areas.
Taking all policy proposals into consideration, the potential risks to the US economy are probably greater under Trump than under Harris. Precise forecasts carry a high degree of uncertainty and are subject to political bias and the assumptions made.
The US economy may suffer towards the end of 2025
However, by way of illustration, Goldman Sachs reckon that the hit to growth from tariffs and tighter immigration policy under Trump would outweigh the fiscal impulse, resulting in a peak hit to GDP growth of 0.5 percentage points in the second half of 2025.
Should the Democrats take the Presidency and Congress, new spending and tax-credits would slightly more than offset lower investment due to higher Corporation Tax, resulting in a very slight boost to Gross Domestic Product growth over 2025/26.
If Harris wins with a divided Congress, the effects of policy changes would be small, according to Goldman.
Trump exceeded economic expectations during his first presidency
Of course, forecasts rarely turn out to be right, and it is worth remembering that the performance of the US economy during the first Trump presidency was generally better than many expected.
Whichever candidate wins, many of the policy proposals set out during the election campaign will probably not come to fruition, be it due to lack of support in Congress or external opposition.
Moreover, government policy is just one element influencing the economy and financial markets. Other factors such as monetary policy, geopolitical developments, corporate profitability will also shape the outlook.
This said, given the gaping policy divide between the two candidates, political developments could become an increasingly significant source of financial market volatility as election day approaches.
Get in touch
If you would like to understand how the outcome of the US elections may affect your investments, or discuss your wider wealth more generally, AFH are happy to help.
As one of the UK’s largest independent financial advice companies, our experienced and knowledgeable experts will explain the best options for you in an understandable, jargon-free way, so that you can make more informed decisions. Either contact your existing AFH adviser or call us on 0333 010 0008 to arrange a consultation.
Friday 25 October 2024