Former President Donald Trump has been describing President Joe Biden’s administration as a disaster for the economy while presenting himself as the man who will correct course. But analysts from Goldman Sachs warn that it’s Trump who would jeopardize an economic recovery with wrongheaded ideas on trade, immigration and other issues.
According to a report released by the investment bank on Tuesday and shared with several news outlets, Trump’s policies, if implemented, could cut into U.S. gross domestic product (GDP) by as much as half a percentage point in 2025 before it rebounds. Even a small decrease in GDP or just slow growth could lead to widespread unemployment, pay cuts and struggling businesses.
“We estimate that if Trump wins in a sweep or with divided government, the hit to growth from tariffs and tighter immigration policy would outweigh the positive fiscal impulse,” the report said, echoing previous warnings by economists who say that Trump’s proposals to raise tariffs and cut taxes will also increase the deficit and inflation rate, not lower them as he has promised.
On the other hand, Goldman predicted that a Kamala Harris presidency and Democratic control of Congress would lead to better economic outcomes, suggesting that spending initiatives and tax credits would “more than offset” any investment slowdown caused by the higher corporate income tax rate that Harris has proposed on the campaign trail. If Harris wins but Congress is divided, the report said, policy changes would be “small” and have little to no effect on the GDP.
Either potential administration may have to deal with changed economic conditions. The Federal Reserve is expected this month to make its first interest rate cut in five years, which some economists view as a sign of confidence amid slowing inflation, while others warn it could send the wrong message about a potential recession and spook investors.
The Harris campaign was quick to capitalize on the Goldman report. “Vice President Harris has a positive vision to strengthen the economy by building up the middle class, cutting taxes and lowering costs for working families and small businesses, and creating opportunities for all Americans to get ahead,” a spokesperson said in a statement. “On the economy, the choice could not be any more clear this November.”