As the 2024 presidential election lies a few weeks away, Moody's Analytics chief economist Mark Zandi joins Catalysts to discuss how the outcome could weigh on the US economy.

Zandi sees the election as the biggest risk to the economy at this juncture. He notes that with the race as contentious as it is, it could take weeks to come to get finalized results, which could be. a complicated process. He adds that congressional outcomes will also be important, and explains, "If it's [Vice President Kamala] Harris with a divided government, we've got a debt limit battle that's brewing next year. If it's a President Trump with a Republican sweep — which seems like a more likely scenario — that's a game-changing event. We're going to be doing tariffs and deportation, and it's just a whole different ballgame."

Former President Donald Trump has discussed implementing at least 10% tariffs on all US imports if elected and has touted increased tariffs on China, which could be up to 60%. Zandi explains that if the US were to adopt these policies, it would be detrimental to the economy: "It means higher inflation just by definition." It would also challenge the Federal Reserve's mandate when it comes to low inflation and could lead the central bank to halt its rate-cutting cycle.

"So it's a combination of higher inflation, higher interest rates, And all that means is slower growth or no growth. So it's a diminished economy," he tells Yahoo Finance.

Trump has also expressed that the president should have more influence over the Federal Reserve. However, Zandi stresses that the Fed's independence is "critical": "It's a cornerstone of the well-functioning market economy like ours. I mean, we need a Federal Reserve that is independent, that makes decisions that aren't influenced by politics, aren't influenced by anything other than achieving those mandates — full employment and low and stable inflation."

Zandi warns, "When central banks are captured by the executive branch, by the president or prime minister, it never works out well... It always results in too easy monetary policy and higher inflation."

While many Americans are worried about the deficit, he explains that both Trump and Harris will add to it, but Trump's policies would likely add more than Harris's.

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This post was written by Melanie Riehl