There’s a lot at stake for 2025 and beyond, regardless of who—former president and Republican nominee Donald Trump or vice president and Democratic nominee Kamala Harris—wins the upcoming U.S. presidential election.
And with just two weeks to go before the Nov. 5 election, uncertainty remains. One concern is what happens with the East and Gulf Coast ports strike. The strike is on temporary hold until Jan 15, 2025, but the remaining issue on automation is still a major sticking point. Deliveries of holiday goods were pulled forward into July and August in anticipation of the strike. And deliveries of many goods continue to be pulled forward. That’s because of the earlier timing of the Lunar New Year in 2025 when Asian factories shut down for two weeks so workers can return home to celebrate with their families. In addition, retailers want to make sure they get timely deliveries of restocking merchandise slated for early 2025 to avoid potential supply chain disruptions.
Deputy chief economist Michael Gregory and senior economist Sal Guatieri concluded in a report that the expiring 2017 tax cuts will be extended regardless of which party wins the White House and which party controls the House of Representatives and Senate.
But under a Harris administration backed by a Democrat-let Congress, they expect that continued deficit spending and expanded tax credits to families and manufacturers could provide a modest economic lift in the near term. But that could see some offset from fewer investments by businesses in response to higher corporate taxes. While Harris talks about providing $100 billion over 10 years in tax credits to manufacturers across a wide range of industries, enforcement of a global corporate minimum tax would also be on the table. Immigration, climate and energy, and trade aren’t expected to change from current policies under the Biden-Harris administration.
Should Democrats control both the White House and Congress, the federal debt would rise from 100 percent of GDP to 133 percent in 2035. And while the higher budget deficit would provide a modest economic boost to growth, the economic lift “would likely not be enough to materially alter the inflation or interest rate outlooks.”
In contrast, a Trump White House and Republican-led Congress should see a larger budget shortfall, corporate tax cuts, and a lighter regulatory touch that would boost growth. But that could see some offset by increased trade protection and higher inflation and interest rates. Still, equity markets and the U.S. dollar would likely strengthen initially. Pledges to seal the border, make America the dominant energy producer, raise tariffs, and levy punitive tariffs on manufacturers that shift domestic product to Mexico are all on the Republican agenda should Trump win.
A Republican control of the White House and Congress would increase publicly-held debt by $7.5 trillion from 2026 to 2035, or almost twice as much as Harris’ plans, with the federal debt rising to 142 percent in 2035, the economists concluded. And while the U.S. economy could see a material lift from corporate tax cuts and the larger budget deficit, any gains could be mitigated by the adverse impact from tariffs along with a potential trade war. Less immigration may also undermine employment and growth, the economists concluded.
If Democrats take the White House, but Congress remains divided, the status quo would likely prevail. But if Republicans take the White House and Congress remains divided, imposing a broad tariff on all countries could run into judicial resistance, Gregory and Guatieri noted, adding that Trump—under most trade protectionist measures—could still impose tariffs on nations judged to have an unfair trade advantage over U.S. firms or that pose a national security threat, without the need for congressional approval.
But higher tariffs could be met with retaliatory actions, which could mean higher inflationary impact and disruptions to supply chains, leading to higher costs and prices. And a Trump administration could be a threat to the continent-wide free trade agreement, as each country to the USMCA—the U.S., Mexico, and Canada—could pull out after giving six months’ notice. The USMCA is slated for review in 2026, when each member nation will decide whether to renew the agreement beyond its pre-set termination date of 2036. And separately, Fed Chairman Jerome Powell’s second term is set to expire in 2026. Trump—who appointed him to the post in 2018—has already said he doesn’t plan to reappoint Powell.
BMO director and ESG strategy specialist Doug Morrow said a Harris administration would be broadly more supportive of sustainable investment themes that include clean energy and climate diplomacy. Harris is expected to support using 2022’s Inflation Reduction Act to fund energy and climate projects, keep the Securities and Exchange disclosure rule, and remain a party to the Paris Agreement. The 2015 Paris Agreement saw 195 parties and the European Union pledge to reduce their carbon emissions.
Morrow concluded that the most negative outcome would see a Trump administration withdraw the U.S. from the Paris agreement, push for the cancelation of the SEC’s climate rule, shelve the federal electric vehicle tax credit. He is also expected to cancel the Biden-era target regarding zero emissions for new vehicle sales, remove tax credits for green hydrogen development, eliminate the Biden-era Power Plant rule, and pressure investors and proxy voting firms to curtail ESG integration.
Retail and services analyst Simeon Siegel said that given Trump’s commentary about a 60 percent import tariff on goods from China and 20 percent on other imported items, a number of brands could face the higher tariff risk because the majority of their goods are produced in Asia. The fashion firms include American Eagle Outfitters, Capri Holdings for its Michael Kors brand, Lululemon, Nike, Gap, PVH, Tapestry, Under Armour, VF Corp., Revolve Group, Ralph Lauren, and Victoria’s Secret. Of this group, Siegel said PVH, Capri, Under Armour, Nike, Tapestry, VF Corp., Lululemon, and Ralph Lauren each have more than 10 percent of total sales exposure to the Greater China region specifically.
The firm’s managing director and chief economist Jay Bryson said in a webinar last week that while Harris would continue the Biden administration’s tariff policy, she likely wouldn’t put tariffs on the European Union, Canada or Japan, among other countries. That doesn’t mean tariffs would be off the table, and in some cases—such as China—she may extend them.
“When former President Trump was in office, he did put tariffs on many of our trading partners, China, the EU, Canada, Japan, etc. When the Biden administration came into office, they removed the tariffs on our Western European allies,” Bryson explained, adding that tariffs were kept largely on China and in some cases has “increased them even more.”
But Bryson also said tariffs raise inflation in the U.S. The baseline for next year in the U.S. is 2 percent inflation. “If you go 10 percent across the board, 60 percent China, you’re looking at an inflation rate next year of roughly 4 percent,” he said.
Trade groups—National Council of Textile Organizations, Footwear Distributors and Retailers of America, Retail Industry Leader Association, National Retail Federation and American Apparel & Footwear Association—have voiced displeasure over Biden’s policy of maintaining tariffs on more than $300 billion worth of Chinese goods that include finished textiles and apparel imports. In their view, the tariffs are a tax on American families when they buy footwear, apparel and other basic goods.
The trade groups aren’t wrong. According to Bryson, “The people who actually end up paying for this at the end of the day…is largely U.S. consumers. It gets passed on to U.S. consumers through higher prices,” the chief economist said. He explained that those higher prices erode consumers’ disposable income, and consequently, their spending.
He also expressed caution on what could happen if Trump gets re-elected and implements tariffs across America’s trading partners.
“If you go back to the 2018-19 situation, the rest of the world, China, the EU, many other trading partners, retaliated by putting tariffs on U.S. exports. And that’s that crimson line there. And what that does is that causes a modest recession next year, as our exports get hit as well,” he said. “And so, you know, in simple terms, [the tariffs gets the U.S.] into a trade war.” He says it will be a “stagflationary shock to the United States economy,” and while it won’t be the type of stagflation seen in the 1970s and 1980s, the impact would be that it would raise the inflation rate.
And while Bryson said the impact doesn’t necessarily mean the U.S. would go into a recession, at the very least it would translate to a slowdown in the GDP growth rate.
Will Trump make good on his threat to challenge election results if he loses again? That would cause much disruption and turmoil.
TD Cowen Washington Research Group strategist Chris Krueger said Friday that Election Day could turn into Election Winter. The national deadline to stop counting votes is Dec. 11, with the timing for states to certify results slated for Dec. 17.
Early voting has started in some states. According to Krueger, the 51-49 Democrat-controlled Senate is likely to flip to Republican control. He said Democrats would “have to win all the battlegrounds AND 2 of Florida, Montana, Ohio, Nebraska, or Texas.”
For the House of Representatives, he said four seats of the 435 House Republican majority is “likely to flip” to Democrats. The map is rough for the Republicans, with the focus around New York and California.
The seven key states are Arizona, Georgia, Michigan, North Carolina, Nevada, Pennsylvania, and Wisconsin. Krueger noted that Michigan is home to many college campuses, as well as Arab-American population centers in Dearborn and Detroit. The Israel-Gaza policy is major topic, although the United Auto Workers endorsement of Harris is a big deal. And in Nevada, the Latino vote is critical for both campaigns, Krueger said, adding that the state is “also has a bellwether Senate race and is ground zero for ‘no tax on tips.'”
For the Senate race, Republicans need a net gain of one seat and the White House, or a net gain of 2 seats without the White House, with the vice president representing the tie-breaking vote.
Krueger expects a higher deficit regardless of which party wins the presidential election. A Harris win would see a tough China policy with a coalition of democracies, as well as a pro-Ukraine policy, also with a coalition of democracies. But the Middle East strategy would remain conflicted. Under Trump, there’s the potential for a repeal of permanent normal trade relations with China. Still, a tougher China policy may see allies hedge due to policy differences. He also expects a Russia-Ukraine settlement, as well as a shifting of the burden to NATO for self defense. He’s also foreseeing a pro-Israel, hawkish Iran policy, and a favorable Saudi Arabia policy, with no gray areas. And the Biden administration’s greenhouse gas emissions rules would likely get repealed.
