Assessing the Macroeconomic
Consequences of Harris vs. Trump

ANALYSIS
August 2024
AUTHOR
Mark Zandi
Mark.Zandi@moodys.com
Chief Economist
Brendan LaCerda
Brendan.LaCerda@moodys.com
Director/Senior Economist
Justin Begley
Justin.Begley@moodys.com
Economist

Vice President Kamala Harris and former President Donald Trump
will pursue very different economic policies if elected president.
Each has put forward a wide range of proposals to change the tax
code, government spending, and trade, immigration and regulatory
policies that could have significant effects on the economy’s
performance. In this analysis we assess the macroeconomic
consequences of the policies proposed by the candidates.

ABOUT
Please attribute information in thisdocument to Moody’s Analytics,
which is a division within Moody’sthat is separate from Moody’s
Ratings. Accordingly, the viewpoints
expressed herein do not reflect
those of Moody’s Ratings.

CONTACT US
Emailhelpeconomy@moodys.com
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Asia/Pacific+852.3551.3077
All Others+1.610.235.5299
Web
www.economy.com
www.moodysanalytics.com

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

1

Assessing the Macroeconomic Consequences ofHarris vs. Trump1
BY MARK ZANDI, BRENDAN LACERDA AND JUSTIN BEGLEY2
Vice President Kamala Harris and former President Donald Trump will pursue very different
economic policies if elected president. Each has put forward a wide range of proposals tochange the tax code, government spending, and trade, immigration and regulatory policies
that could have significant effects on the economy’s performance. In this analysis we assess
the macroeconomic consequences of the policies proposed by the candidates.
Of course, what ultimately becomes law and is implemented depends in significant part on
the makeup of Congress. We thus consider four scenarios. We deem the most likely scenario
to be that Harris is elected president, but that she will need to negotiate with a divided
Congress. The Senate will flip to Republican control and the Democrats will narrowly win
control of the House (see Chart 1).3 This Harris & Divided Congress scenario (45% probability)
is our baseline scenario and is largely consistent with the policy status quo.

Chart 1: 2024 Presidential Election Scenarios
Ordered from most likely to least likely

1

2

3

4

Harris & Divided Congress
Scenario

Republican Sweep
Scenario

Trump & Divided Congress
Scenario

Democrat Sweep
Scenario

45% probability

35% probability

15% probability

5% probability

It is challenging for Harris and
Democrats to implement asignificant economic agenda. This
scenario is thus mostly consistent
with the status quo. The exception isan agreement extending current
lower tax rates for individuals
making less than $400,000 per year.

Trump makes permanent theindividual tax cuts from the TCJA.
He imposes higher tariffs on
China and many other nations
and imposes much more
restrictive immigration policies,
including more deportations. His
deregulatory banking, energy andclimate policy agenda isreinvigorated.

Trump pursues most of his
economic policies, including
making permanent the tax cuts
for individuals. Other policies
concerning tariffs, immigration andregulations are implemented via
executive orders. Many of his policy
moves are challenged in the courts,
but this does little to dissuade
his policies.

The Biden-Harris administration’s
fiscal 2025 budget is fully
implemented. Tax cuts are extended
for individuals earning less than$400,000 per year, but higherincome earners see their taxes rise.
Corporate taxes increase, with thestatutory rate rising from 21% to 28%,
among other novel reforms. Certain
tax credits aimed at low- and middleincome individuals are expanded.

Harris aggressively uses executive
orders, but there is legislative
stagnation.

Spending is focused on
redistributing new tax revenues tolow- and middle-income households.

Source: Moody’s Analytics

Nearly likely is the Republican Sweep scenario (35% probability), which assumes Trumpis victorious and there is a Republican sweep of Congress. In this scenario, CongressThis paper is part of an ongoing Moody’s Analytics analysis of the economic implications of candidates’ policy proposals in the2024 U.S. presidential election. Moody’s Analytics will continue to publish a series of reports throughout the election cycle
analysing the candidates’ proposed tax and economic plans. We do not endorse or support any political party or candidate,including those in the 2024 U.S. presidential election.
2 The authors have not made contributions to either presidential candidate during this election cycle, and Mark Zandi served as
an economic advisor to the 2008 John McCain presidential campaign
3 This scenario is the Moody’s Analytics May 2024 baseline scenario, and is based on our model of the presidential
election outcome.
1

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Assessing the Macroeconomic Consequences of Harris vs. Trump

August 20242

fully adopts the policies Trump espouses. We also consider a less likely Trump & Divided
Congress scenario (15% probability) in which Trump is reelected, the Senate goes Republican,
but the House flips to the Democrats.
Finally, the least likely Democrat Sweep scenario (5% probability) assumes Harris and the
Democrats sweep the presidency and Congress and fully implement the economic agendathat is laid out in the Biden-Harris administration’s recent fiscal 2025 budget proposal forthe federal government.4
We use the Moody’s Analytics model of the U.S. and global economy for this analysis.5 The
model is a general equilibrium structural model similar to those used by the Federal Reserve
Board and Congressional Budget Office for forecasting, budgeting and policy analysis. The
Moody’s Analytics model was used to evaluate the plethora of fiscal and monetary policies
implemented during the 2008-2009 global financial crisis and COVID-19 pandemic, andmany of the economic policies proposed by presidential candidates in other elections.6
Quantifying the macroeconomic impact of Trump’s policies is complicated by their lack oftransparency and specificity, requiring us to make assumptions regarding their design andsize. We rely on Trump’s campaign website, speeches, press announcements, interviews, andpublic commentary from campaign advisors to determine his policy positions. We assume
that Harris will adopt the same policies as put forward by the Biden-Harris administrationand laid out in detail in its fiscal 2025 budget proposal. Complicating the evaluation of theirmacroeconomic impact is the wide range of proposals, some of which are familiar and wehave already modeled and analyzed, while others are new and untested.
Some economic policies floated during the campaign are not included in this analysis, including
some regulatory and anti-trust proposals. While these policies may have noteworthy impacts on
specific industries or companies, they do not have significant macroeconomic consequences.7
A noteworthy exception is the possibility that Trump may work to impede the independence of
the Federal Reserve and the conduct of monetary policy. In his first term, the former president
was openly critical of Fed policy and Fed Chair Jerome Powell, and credible media reports suggest
Trump advisors are carefully considering steps he might take to influence or determine the settingof interest rates in a second term. Although this would have serious negative macroeconomic
consequences, we consider it too speculative to include it in our analysis.
We assume that the candidates’ policies are implemented immediately after they take office inJanuary and do not change throughout their term. We also assume there are no other significant
policy changes. Monetary policy, including the federal funds rate and any quantitative easingor tightening, is determined endogenously in the Moody’s Analytics model using a Taylor-rulelike reaction function that is based on the Federal Reserve Board’s framework for conducting
monetary policy and is consistent with the historical behavior of the Fed in setting policy.
4 In the Democrat Sweep and Republican Sweep scenarios we effectively assume the Senate does away with thefilibuster rule to allow for full adoption of Harris’ and Trump’s policies, respectively. This further reduces the odds
that these scenarios will occur, but they bookend the possible economic outlooks due to policy changes resulting
from the outcome of the election.
5 A detailed description of the Moody’s Analytics model of the U.S. economy is available here. More detailed validation documentation is available on request.
6	See “The Macroeconomic Consequences of Trump vs. Biden,” Mark Zandi and Bernard Yaros, Moody’s Analytics white
paper, September 2020. Also see “The Macroeconomic Consequences of Mr. Trump’s Economic Policies,” Mark Zandi,
Chris Lafakis, Dan White and Adam Ozimek, Moody’s Analytics white paper, June 2016, and “The Macroeconomic
Consequences of Secretary Clinton’s Economic Policies,” Mark Zandi, Chris Lafakis and Adam Ozimek, Moody’s Analytics
white paper, July 2016.
7	See “Death, Taxes and Regulation,” Mitch Murphy, Mark Zandi and Dante DeAntonio, Moody’s Analytics white paper,August 2018.
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Assessing the Macroeconomic Consequences of Harris vs. Trump

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HARRIS & DIVIDED CONGRESS (45% PROBABILITY)
The most likely scenario, which is the Moody’s Analytics baseline outlook, is that Harris
wins the election and Congress remains divided. However, control of Congress shifts in this
scenario, with the Senate flipping Republican and the House Democratic.
The expectation that Harris will win the election is based on our model of presidential elections
since 1980 (see Chart 2). We have modeled the share of the vote that goes to the incumbent
party across states based on a wide range of political and economic factors. Based on various
political assumptions, including voter turnout that is similar to the 2020 election and thirdparty candidates taking a comparable share of the vote as they have in past elections, andour baseline state-level economic outlook, Harris narrowly wins the Electoral College and thepresidency. Pennsylvania, which she wins by fewer than 10,000 votes, puts her over the top.

Chart 2: Harris Narrowly Wins the Presidency
Winning candidate by state and margin of victory, Jul 2024 forecast

Solid Democrat, >5%
Lean Democrat, 1% to 5%
Swing Democrat, 0% to <1%
Swing Republican, 0% to <1%
Lean Republican, 1% to 5%
Solid Republican, >5%
Electoral college:
Democrat 286
Republican 252

Source: Moody’s Analytics

The Senate appears likely to go Republican. With the retirement of West Virginia Democrat
Joe Manchin, the deep red state will almost surely elect a Republican senator, leaving the
Senate evenly divided. But while recent polling shows that Senate races in Arizona, Maryland,Montana, Nevada and Ohio are close, Republicans need to take only one of these seats toregain the majority (see Chart 3). Each race has its own story but helping the Republicans’cause is angst over higher prices and heightened concern over the immigration crisis at thesouthern border. Polling shows both these issues favoring Republicans over Democrats.
The House is expected to go to the Democrats. The Republicans hold a razor-thin majority, and the
Democrats need to take just four additional seats from the GOP to secure a majority, assuming
no upsets in current Democratic strongholds. Recent federal judicial decisions on redistricting
efforts have also leaned in Democrats’ favor, boosting their chances. Also, given that incumbents
win reelection more than 90% of the time, the relatively high number of congressional retirements
relative to previous cycles creates the potential for more change in the body.

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Assessing the Macroeconomic Consequences of Harris vs. Trump

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Chart 3: Which States Will Determine Control of the Senate?
Senate elections in 2024

No seats up for election
Solid or likely Democrat
Lean Democrat
Toss-up
Lean Republican
Solid or likely Republican

Sources: The Cook Political Report, Moody’s Analytics

This scenario more or less assumes the policy status quo but with significant political drama.
A detailed description of the Biden-Harris administration’s policies is provided in Appendix
A: Harris’ Economic Policies. The drama begins immediately at the start of Harris’ term withthe expiration of the Treasury debt limit suspension. In 2023, President Biden and Congressnegotiated a compromise bill—the Fiscal Responsibility Act—to suspend the debt limit until
January 1, 2025. On that date, the ceiling will adjust to the amount of debt outstanding at the timeand Treasury will begin so-called extraordinary measures to maintain a positive cash balance foras long as it can until Congress and the president raise, suspend or eliminate the debt limit.
We expect the Treasury to run out of cash by summer 2025, and we assume that lawmakers
will come to terms at the last moment, as they have done historically, pushing the debt limit
further down the road and avoiding a government default. Of course, this is not without acost, since it further damages global investor trust in the willingness of the U.S. government
to pay its obligations in a timely way.
As part of the debt-limit deal, lawmakers are assumed to cement the government spending
caps agreed to in the Fiscal Responsibility Act, perhaps with the threat of sequestration,
which leads to smaller increases in defense spending and further cuts to nondefense outlays
in Harris’ term. The debt limit deal also includes a compromise on taxes. Under current law,
the personal income tax provisions in the Tax Cut and Jobs Act passed in Trump’s first term
are set to expire at the end of 2025. In this scenario, lawmakers extend some, but not all, ofthe personal income tax cuts, primarily for those with annual incomes below $400,000. Tax
cuts for higher earners expire to the chagrin of Republicans, although Harris is not able topush through her proposed corporate tax increases.
We also expect the agreement to include tax provisions similar to those that received bipartisan
support earlier this year in the Tax Relief for American Families and Workers Act. Democrats get
an increase in the child tax credit, a higher ceiling for the low-income housing tax credit, and an
extension of expanded Affordable Care Act premium tax credits. Republicans get an extension
to some corporate tax provisions in the TCJA, including business deductions for research andMoody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 20245

development costs, an extension of the 100% bonus depreciation for qualified properties, and anincrease in the limits on the expensing of depreciable business assets.
We expect Harris to impose much tougher restrictions on unauthorized immigrants crossing thesouthern border, and while she will pursue broader immigration reform, we assume legislation willremain elusive. Instead, she will get increased border funding and an expansion of the ability ofborder control and immigration courts to handle higher volumes of illegal immigrants and asylees.
Harris will also impose targeted tariff increases, much like Biden’s recently announced 100%
tariffs on Chinese electric vehicles and solar panels, to help U.S. companies in their competition
with government-supported Chinese firms. Finally, efforts to facilitate the transition to clean
energy as embodied in the Inflation Reduction Act, including broader use of electric vehicles
and solar energy, higher gas mileage requirements, and stiffer utility emission standards will be
reinforced by the Harris administration.
In the Harris & Divided Congress scenario, the economy continues to operate near its potential,
growing quickly enough and creating enough jobs to ensure it remains at full employment withan unemployment rate close to 4% (see Table 1). Inflation steadily moderates and returns to theFederal Reserve’s 2% target by summer 2025. The Fed begins to cut interest rates this fall, andslowly reduces the federal funds rate to its estimated equilibrium rate, or r-star, near 3% by theend of 2026, and long-term interest rates hold steady. The budget deficit stabilizes at just over
5% of GDP and the federal government’s publicly traded debt-to-GDP ratio increases from its
current nearly 100% to 105% by the end of Harris’ first term.8
No new major policy legislation is assumed in this scenario, but the policies passed in the
Biden-Harris administration, including the Infrastructure Investment and Jobs Act, theCHIPS Act, and the IRA, are solidified and continue to have economic impacts.
Broadly, these policies provide tax subsidies and government outlays to enhance the nation’s
basic infrastructure, incent more semiconductor production and R&D in the U.S., and reducecarbon emissions to address climate change. Ultimately in total, the budgetary cost of thesepolicies is largely a wash. The policies support growth through increased construction andmanufacturing, which will continue well into Harris’ term. The policies also underpin longerterm growth by lowering businesses’ transportation and communication costs, improving
supply-chain resilience, and reducing risks posed by U.S. dependence on foreign chipproduction. The benefits of lower carbon emissions play out over much longer periods.

REPUBLICAN SWEEP (35% PROBABILITY)
Given how close the election is sure to be, we consider the Republican Sweep scenario
to be nearly as likely as the Harris & Divided Congress baseline scenario. Trump needs toswing only a state or two to win the election, and if he is reelected president, it seems likely
his political coattails will ensure the Senate flips Republican and the House remains underRepublican control. While the two scenarios are nearly as likely, the economic outlook
depending on which scenario prevails is meaningfully different.

8 The risks to this sanguine baseline economic outlook are two-sided. On the upside, the economy may enjoy stronger
than anticipated productivity gains due to the increased adoption of remote work and generated by technologies suchas artificial intelligence. Immigration reform may also get through the legislative process, supporting stronger labor
force and productivity gains. On the downside, geopolitical tensions could intensify, most significantly between the
U.S. and China, accelerating the pace of deglobalization. Climate change could ignite more and bigger weather events
than anticipated, increasing insurance and other business and living costs more quickly than expected.
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Broadly, the policies adopted under the Republican Sweep scenario result in higher inflationand interest rates and weaker economic growth (see Table 2). A detailed description of
Trump’s policies is provided in Appendix B: Trump’s Economic Policies. Contributing mostdirectly to this outcome are Trump’s proposed tariff hikes and immigration enforcement
measures. We assume he makes a number of these changes through executive orders andthus bypasses the legislative process, much as he did in his first term. These moves will likely
be challenged in the courts, but the policies will be implemented long before the judicial
system finally rules on their legality. And given Republican control of Congress, whatever heis unable to do through executive order, we assume he is able to accomplish legislatively.
The tariff increases Trump imposed in his first term were limited. At their peak in 2019, they
impacted about 10% of U.S. imports and were limited to specific products, mostly coming from
China. They nonetheless did measurable economic damage, particularly to the agriculture,
manufacturing and transportation industries. A tariff increase covering nearly all goods imports,
as Trump recently proposed, goes far beyond these previous actions. Goods imports account for
more than 10% of U.S. consumer spending (see Chart 4). The proposed tariff policy raises costs
for businesses and in turn weighs on growth and productivity and lifts inflation as businesses
pass much of their higher costs to consumers.

Chart 4: Top U.S. Trading Partners
U.S. imports by country, $ bil
3,500
3,000
2,500
2,000
1,500
1,000
500
0
97 98 99 00 01 02 03 04 05 06 07 08 09 10
China

MexicoCanada

11

Japan

12

13

14

15

16

17

European Union

18

19

20

21

22 23

ROW

Sources: Census Bureau, Moody’s Analytics

The higher tariffs do not materially help reduce the U.S. trade deficit. Demand for imports
declines with the higher tariffs, but a resulting higher real trade-weighted dollar andweaker global growth cause exports to suffer, roughly offsetting the impact on the tradebalance. U.S. exports also suffer because of retaliation by many other countries to the U.S.
tariffs. Which countries raise tariffs on U.S. goods and by how much depends on a range of
economic, political and geopolitical factors. We rely on the expert judgement of our country
economists to determine this (see Appendix C: Retaliation to Trump Tariffs).
Further, given the continued fragility of global supply chains, higher tariffs run the additional risk of
disrupting trade flows. Uncertainty over further possible policy changes is likely to deter investment
Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

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in global supply-chain networks. Deliveries could also be disrupted as producers divert shipments
to markets with lower tariffs and businesses try to source from domestic suppliers.
Trump’s proposed immigration enforcement measures, including more restrictive immigration
policies and mass deportation of unauthorized immigrants, quickly cause a significant tightening
in the already tight job market, particularly in industries such as agriculture, construction, leisureand hospitality, and retailing, where immigrant workers are more prevalent (see Chart 5). The surge
in immigration across the southern border since the pandemic reopening has presented many
challenges to communities across the nation (see Chart 6), but the benefit has been to significantly
increase labor supply and help ease wage and price pressures. This in turn has forestalled evenmore aggressive interest rate hikes by the Federal Reserve and thus a possible recession. Reversing
these immigration flows as Trump is proposing will quickly result in a tighter job market and foment
wage and price pressures with immigrant-heavy industries taking the greatest hit (see Chart 7).

Chart 5: Immigrants Are Crucial to U.S. Goods Production & World Food Supply
Distribution of unauthorized immigrants, % share ofunauthorized immigrant population by industry
Naturalresources,
4.5%

Other, 7.5%
Leisure andhospitality,
16.8%

Construction, 17.7%

Educationandhealthcare,
7.3%

Manufacturing,
12.6%

Composition of U.S. labor force, % industry share of
employment by immigration status
45
40
35
30
25
20
15
10
5
0

Trade, 11.4%

Professional
services, 14%
Finance, 3.3%

Transportation andutilities, 3.7%
Information, 1.1%

LawfulUnauthorized

Sources: Pew Research, Moody’s Analytics

The Federal Reserve, which has been focused on labor costs and inflation, will feel compelled
to resume its interest rate hikes, or at the very least wait longer to cut rates. Economic growthslows, and recession becomes a serious threat once again.
Adding to the inflationary pressures are Trump’s proposed partially deficit-financed corporate
tax cuts. We assume these tax cuts would be done as part of a reconciliation bill that allows
the Senate to pass the legislation with a simple majority, which Republicans have in this
scenario. The revenue generated from the higher tariffs offsets only part of the tax revenue
lost because of the lower statutory tax rate on corporate profits.9 This fiscal stimulus boosts
economic growth at a time when the economy is already operating at full employment andgrowing at its potential, limiting any boost to hiring and investment and fanning inflation.
The corporate tax cuts reduce businesses’ cost of capital and lift investment and longer-term
9 Over the 10-year budget horizon, 2025-2034, we estimate the higher tariffs will generate $1.7 trillion in revenue,
while the tax cuts will cost $3.4 trillion in revenue. The net impact of the tariffs and tax cuts is to increase thegovernment’s cumulative budget deficit over the decade by $1.7 trillion.
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Chart 6: U.S.-Mexico Border Crossings Surge to an All-Time HighSouthwest border encounters, ths
2,500
2,000

Enhanced
Border
Security
and Visa
Entry
ReformAct (2002)

Illegal Immigration
Reform and ImmigrantResponsibility Act(1996)

Note: Remain in Mexico wasrepealed by the Biden
administration in Feb 2021, Title 42
was allowed to expire in May 2023

Secure Muslim
Fence Act travel ban(2006)(2017)

1,500

Remain in
Mexico(2019)

1,000

Title 42(2020)

500
060 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
Sources: CBP, Moody’s Analytics

Chart 7: Immigrant-Heavy Industries Suffer Labor Shortages
Real GDP by industry, Republican Sweep scenario, % deviation from baseline, 2028Q4
MiningFinancial services
Information
Transportation and utilities
Education/healthcare
Professional/business services
Manufacturing
Leisure/hospitality
Other services
Construction
Agriculture/forestry/fishing
-12

-11

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

1

Source: Moody’s Analytics

economic growth, but these benefits are largely offset by higher interest rates. Short-term
rates are higher given the Fed’s response to the higher inflation, and long-term rates are higher
because of the government’s larger deficits and heavier debt load.
While Trump rolls back some of the provisions of the IRA in this scenario, this does little to help
the government’s fiscal situation. The IRA’s clean energy investments were paid for by stricter IRS
enforcement on tax avoidance and new taxes, which Trump has indicated he would also unwind.
Of course, the IRA investments are intended to address the economic threat posed by the
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physical risks caused by climate change. The likely increase in climate-related economic costs
will largely be borne in future decades and is thus not part of this analysis.
Under the Republican Sweep scenario, consumer price inflation reaccelerates from 3% in2024 to 3.5% next year (see Table 2), fueled by the higher tariffs, outflow of foreign immigrants,
the resulting tighter labor market and more quickly rising labor costs, and tax-cut-fueledfiscal stimulus (see Chart 8). Compared with the baseline scenario, Trump’s policies add 1.1
percentage points to CPI inflation in 2025 (see Table 3). The Federal Reserve does not raise
rates in response, as it is torn between higher inflation and a weakening economy but is muchslower to cut rates. Long-term interest rates remain elevated.

Chart 8: Inflation Higher Under the Republican Sweep Scenario…
Consumer price inflation, difference with baseline, ppts
2.0
1.5
1.0
0.5
0.0
-0.5
24Q4 25Q1 25Q2 25Q3 25Q4 26Q1 26Q2 26Q3 26Q4 27Q1
IRA repeal

Immigration

Tariffs

27Q2 27Q3 27Q4 28Q1 28Q2 28Q3 28Q4
Tax code

Total

Sources: BLS, Moody’s Analytics

The higher inflation and interest rates weigh on real incomes and consumer and businesssentiment, and the economy suffers a recession beginning in mid-2025. The downturn ismild by historical standards with unemployment rising from near 4% to a peak of more than
5% in early 2026. The recession and higher unemployment ultimately quell the high inflationand the Fed finally begins to lower interest rates. While the economy recovers beginning in
mid-2026, employment is still 3.2 million jobs lower and the unemployment rate is nearly halfa percentage point higher by the end of Trump’s term compared with the baseline (see Chart
9). The lower employment reflects a combination of weaker labor force growth, due to the
reduction in immigration and deportations, and layoffs due to the economy’s deterioration.
Despite the recession, corporations navigate things reasonably well in the Republican Sweep
scenario. Their sales and revenues are weaker, but the financial impact is offset by businesses’
lower tax liability. Households, however, do less well financially. The typical American household’s
real after-tax income is approximately $2,000, or 1.4%, lower by the end of Trump’s term in this
scenario than in the baseline. The value of their stock holdings and homes is also somewhat
diminished by the higher interest rates.
The government’s fiscal situation is worse in this scenario (see Chart 10). Budget deficits are
consistently more than 6% of GDP and the nation’s debt load increases from just less than 100%
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Chart 9: …Even as GDP and Employment Are Weaker
Real GDP, % difference from baseline

Nonfarm payrolls, % difference from baseline

0.5

0.5

0.0

0.0

-0.5

-0.5

-1.0

-1.0

-1.5

-1.5
-2.0

-2.0
25

26

27
IRA repeal

25

28
Immigration

Tariffs

26
Tax code

27

28

Total

Sources: BEA, BLS, Moody’s Analytics

Chart 10: Budget Deficits Are Larger in the Republican Sweep Scenario
U.S. federal budget deficit, % of GDP, deviation from baseline scenario, ppts
0.5

0.0

-0.5

-1.0

-1.5
24Q4 25Q1 25Q2 25Q3 25Q4 26Q1 26Q2 26Q3 26Q4 27Q1
IRA repeal

Immigration

Tariffs

27Q2 27Q3 27Q4 28Q1 28Q2 28Q3 28Q4
Tax code

Total

Sources: BEA, Moody’s Analytics

to 114% by the end of Trump’s term. The poorer fiscal outlook reflects the weaker economy andthe resulting impact on tax revenues and government transfer payments, the tax cuts, and thehigher interest rates and thus higher borrowing costs on the more quickly increasing debt.
The fallout of Trump’s economic policies in this scenario reverberates around the global economy.
Growth is diminished across the world as tariff hikes and a weaker U.S. economy weigh heavily
on global trade (see Table 4). Countries that rely heavily on trade, such as Hong Kong, Singapore
and China, get hit especially hard. Fragile emerging economies that typically suffer in risk-off
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11

environments and the resulting flight to quality in capital flows also suffer—these countries
include Venezuela, South Africa and Argentina. Southeast Asia’s economy weathers the global
weakness better because of trade diversion from China—Indonesia and the Philippines are good
examples. Mexico also ultimately benefits from the trade diversion. The flight to quality in capital
flows also benefits more stable economies in Europe, including the Scandinavian countries,
France, and Germany.

TRUMP & DIVIDED CONGRESS (15% PROBABILITY)
The Trump & Divided Congress scenario is meaningfully less likely, since a Trump victoryshould win the day for enough Republicans in close congressional races. But those races arechallenging to handicap, and given the political chaos among House Republican ranks over who
would be speaker and their inability to get little done legislatively, voters may have had enough.
Democrats win the small handful of races they need to retake control of the House.
In this scenario, Trump is stymied from making some of the sweeping policy changes he has
proposed. We assume he is able to extend the lower personal income tax rates for all taxpayers
provided by the TCJA, including for high-income households, but he is unable to further
reduce the corporate tax rate. He is able to axe the additional funding the IRS received aspart of the IRA, but the rest of the IRA largely survives. That is in part because red states havebenefited most from clean energy investments, and Trump will not have enough support fromcongressional Republicans to meaningfully cut the IRA subsidies.
We also assume in this scenario that Trump is less aggressive in increasing tariffs, lifting themto an average of 5% and providing exemptions for close trading partners and allies while keeping
the pressure on China. This would be similar to how the trade war played out in his first term,with numerous concessions provided to allies such as the European Union, the United Kingdom,
Mexico, and Canada, while tariffs remain high on Chinese imports.
Trump’s rhetoric on immigration and the policies he ultimately adopts are materially different in this
scenario. Despite broad powers allocated to the executive regarding the border, Congress puts up
roadblocks and Trump faces logistical hurdles in trying to deport many immigrants. The hurdles
include assembling resources to apprehend immigrants winning the inevitable court battles andnegotiating a place to send the immigrants. In this scenario, we therefore expect a less severe
reduction in net immigration, with deportations closer to 500,000 annually, similar to the pace inTrump’s first term.
The economy is diminished in the Trump & Divided Congress scenario compared with the baseline,
but it avoids recession (see Table 5). Inflation does not accelerate as it does in the Republican
Sweep scenario, but consumer price inflation remains stubbornly stuck at 3% in 2025 (see Chart
11). The Fed delays its rate cuts, and long-term rates are somewhat higher. The higher inflation andinterest rates weigh on the economy, but do not undermine it. The unemployment rate rises fromjust less than 4% to a peak below 5% (see Chart 12). By the end of Trump’s term, unemployment isstill somewhat higher than in the baseline, and annual real household incomes are almost $500
lower. Budget deficits are consistently near 6% of GDP and the debt-to-GDP ratio rises to 110%.

DEMOCRAT SWEEP (5% PROBABILITY)
The Democrat Sweep scenario, in which Harris is elected president and the Democrats sweep
Congress, is far-and-away the least likely. While the election math for the Democrats to remain
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Assessing the Macroeconomic Consequences of Harris vs. Trump

August 202412

in control of the Senate is difficult, it is not impossible, especially if the electorate’s perceptionof the economy improves and voters’ focus turns to issues such as abortion and away from thesouthern border.

Chart 11: Stubborn Inflation…
Core CPI inflation, % change yr ago
7
6
5
4
3
2
1
19

20

21

22

Harris & Divided Congress

23

24

Republican Sweep

25

26

Trump & Divided Congress

27

28

Democrat Sweep

Sources: BLS, Moody’s Analytics

Chart 12: …And Higher Unemployment
Unemployment rate, %8*13% peak in 2020Q2
7
6
5
4
3
19

20

21

Harris & Divided Congress

22

23

24

Republican Sweep

25

26

Trump & Divided Congress

27

28

Democrat Sweep

Sources: BLS, Moody’s Analytics

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Assessing the Macroeconomic Consequences of Harris vs. Trump

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In this scenario, Harris uses the budget reconciliation process to pass a sweeping tax andgovernment spending bill consistent with the Biden-Harris administration’s 2025 budget
proposal. The legislation increases the corporate tax rate to 28% from its current 21% and allows
personal income tax rates for those making more than $400,000 annually to increase back totheir higher pre-TCJA rates. There is a new top individual tax bracket, and the additional Medicare
tax applied to higher-income earners is increased. Lower- and middle-income taxpayers continue
to pay their current lower TCJA tax rates, and some benefit from a much larger child tax credit
and expanded earned income tax credit. There are also more tax credits to address the affordable
housing shortage, such as an enhanced low-income housing tax credit.
The legislation also includes a sizable boost to spending on a range of government programs
that benefit low- and middle-income Americans, including universal pre-K, eldercare, Affordable
Care Act subsidies and other public health initiatives, free community college, public housing
investments, and paid family leave.
The economy performs better in this scenario than in the other scenarios by the end of Harris’
term based on some measures such as real GDP (see Chart 13) and jobs (see Chart 14), but not
as well as the baseline scenario on other measures such as real disposable household income
and after-tax corporate profits given the higher marginal rates that high-income households
and large businesses are required to pay (see Table 6). Lower corporate earnings weigh on stock
prices despite lower interest rates in this scenario, although the lower rates help lift single-family
housing demand and house prices.

Chart 13: Somewhat Strong Growth Under the Democrat Sweep…
Real GDP, % change annualized
8
7
6
5
4
3
2
1
0
-1
-2
-3
21

22

23

Harris & Divided Congress

24

25

Republican Sweep

26

27

Trump & Divided Congress

28
Democrat Sweep

Sources: BEA, Moody’s Analytics

While the impact on the broader economy is more or less a wash, Harris’ policies boost thefinances of lower- and middle-income Americans. Their financial situation is meaningfully betterin this scenario as they benefit from increased government spending on childcare and eldercare,healthcare, education, and public housing. And these increased benefits are paid for by theincrease in taxes paid by high-income and wealthy households.

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Assessing the Macroeconomic Consequences of Harris vs. Trump

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Chart 14: …And More Jobs
Change in nonfarm payroll employment, 2025-2028, mil
4
3
2
1
0
-1
Harris & Divided Congress

Republican Sweep

Trump & Divided Congress

Democrat Sweep

Sources: BLS, Moody’s Analytics

The increased tax revenue in this scenario also helps reduce government deficits, which
remain closer to 4% of GDP. The government’s debt-to-GDP ratio thus holds steady at close
to 100% throughout Harris’ term (see Chart 15). The smaller budget deficits and a lighter
government debt load help keep inflation in check and contribute to lower interest rates.

Chart 15: A Better Fiscal Trajectory Under a Democrat Sweep
Federal debt held by the public as a % of GDP
115
110
105
100
95
90
85
80
75
19

20
21
Harris & Divided Congress

22
23
Republican Sweep

24

25
26
Trump & Divided Congress

27
28
Democrat Sweep

Sources: U.S. Treasury, BEA, Moody’s Analytics

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Assessing the Macroeconomic Consequences of Harris vs. Trump

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15

APPENDIX A: HARRIS’ ECONOMIC POLICIESTo determine the economic policies that Kamala Harris will pursue if elected and are included
in our Democrat Sweep and Harris & Divided Congress scenarios we rely on the Biden-Harrisadministration’s fiscal 2025 budget proposal. While Harris may frame her economic policy
differently from President Biden, and change what policies she emphasizes, we consider thisbudget proposal to be consistent with Harris’ economic policy wish list. The budget scores forthe spending proposals are those provided by the Office of Management and Budget, and theimpact of the tax proposals on government revenue is determined based on simulations of ourglobal macroeconomic model.
MORE GOVERNMENT SPENDING
Harris will increase nondefense discretionary government spending by nearly $1.7 trillion overthe next decade (see Chart 16). At the top of her spending agenda are efforts to expand accessto childcare and eldercare, improve college access and affordability, and reduce healthcare
and prescription drug costs. The added government spending would be paid for through higher
taxes on higher-income households and corporations and various spending reforms.

Chart 16: Government Spending Under President Harris
Projected outlays from Biden-Harris spending proposals, $ bil
400
300
200
100
0
-100
25
26
27
Childcare
College and vocational training
EITC
Total

28

29
Healthcare
Housing
CTC

30

31

32
33
34
Prescription drugs
Paid leave
Additional investments and reforms

Sources: OMB, Moody’s Analytics

For childcare, the budget proposes $600 billion in additional spending over the next 10 years
to fund universal preschool for 4-year-olds and increase childcare subsidies for households
that have pre-kindergarten-age children and earn no more than $200,000 per annum. For
higher education, Harris would spend nearly $300 billion over the next decade to fully fundcommunity college, subsidize low-income students enrolled in historically Black colleges anduniversities, eliminate student debt-related fees on new federal loans, and provide federal
funding for vocational training.
On healthcare and prescription drugs, the budget devotes nearly $500 billion over the next
decade to make the expanded Affordable Care Act premium tax credits that were included in
the IRA permanent, while funding Medicaid-like coverage to individuals in states that haveto this point opted out of Medicaid expansion. The budget would also shift funding for the
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Assessing the Macroeconomic Consequences of Harris vs. Trump

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Indian Health Service from discretionary health to mandatory spending and increase publicfunding for behavioral and mental healthcare, which is expected to carry a 10-year price tagof about $340 billion. Helping to offset these costs will be efforts to enhance Medicare drug
price negotiations and reduce costs to the federal government.
In addition to increasing spending on nondefense discretionary programs, Harris will increase
government transfers by establishing a universal paid family and medical leave programadministered by the Social Security Administration. This would replace the wages of new parents
and those who temporarily step away from work for medical reasons for up to 12 weeks. Medicare
funding for home and community-based care is also expanded. Together, these transfer programs
would increase spending by $480 billion over the next decade, with much of the spending
occurring in the second half of the 10-year budget horizon.
HIGHER TAXES
Central to Harris’ policy proposals are significant changes to the tax code as she seeks to morethan offset the cost of her proposed increase in government spending with more tax revenues.
Most straightforward is her plan to restore the marginal tax rate on personal income to the
Obama-era 39.6% for single tax filers earning more than $400,000 per annum and married
filers earning more than $450,000. Capital gains would also be taxed at the same rate aswage income for those earning $1 million or more per year—that is, at 39.6%, up from thecurrent 20%. Moreover, Harris would limit 1031 like-kind exchanges—which allow real estate
investors to sell properties for investment purposes or swap properties to defer capital gains
tax payments—at $500,000. She would also restrict high-income taxpayers’ contributions totheir retirement accounts if their balances are greater than a still-to-be-determined amount.
She also plans additional tax credits. Indeed, the budget would make permanent the American
Rescue Plan’s expansion to the earned income tax credit for childless workers (see Chart 17)
and expand the child tax credit from $2,000 to $3,000 per child age 6 and older and to $3,600
per child younger than 6 years old.

Chart 17: Harris’ EITC Would Give Boost to Workers Without Children
Earned income tax credit by household earnings and marital status, $, 2023
8,000
7,000
MarriedSingle/head of household

6,000
5,000
4,000
3,000

*estimated

2,000
1,000
0
$0

$10,000
No children$20,000
One child$30,000

Two children$40,000
Three+ children$50,000$60,000

Biden proposed expansion*

Sources: IRS, Center for Budget and Policy Priorities, Moody’s Analytics
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Assessing the Macroeconomic Consequences of Harris vs. Trump

August 202417

Less straightforward are various untested personal income tax proposals. First, she would
impose a minimum 25% wealth tax on those with a net worth of $100 million or more. Under
the Biden administration’s expanded definition of income, unrealized capital gains would
be subject to taxation at this rate. Moreover, she would reform estate and gift taxes bymodifying estate, gift, and generation-skipping transfer tax rules. This would entail allowing
the TCJA’s higher estate tax exemptions to expire and taxing unrealized capital gains at death
above $5 million for individuals and $10 million for joint filers.
Taking the Biden-Harris administration’s personal income tax proposals together, they would
increase the effective rate on personal income from approximately 9.5% to 10.2% a decadefrom now.
Harris would also increase payroll taxes to shore up the Medicare program. In their 2024
report, the Trustees of the Social Security and Medicare trust funds projected that the Health
Insurance trust fund will be depleted by 2036. To extend the fund’s lifespan, Harris would
raise the additional Medicare tax from 0.9% to 2.1% for workers earning more than $400,000.
Currently, the burden of the Medicare payroll tax is split between the worker and the employer
at 1.45% a piece. But employers must also withhold an additional 0.9% of wages for workers
that exceed $200,000 per annum. Thus, with the hike, wages exceeding $400,000 would
be taxed at 5% for Medicare, up from 3.8%. Moreover, business pass-through income would
also be subject to Medicare taxes by applying the net investment income tax and increasing
the rate from 3.8% to 5%. Harris’ policy changes would push the effective social insurance
contribution tax rate up from an estimated 15.2% to 15.7% a decade from now.
Like the changes Harris has proposed for individual income taxes, her corporate tax reforms
include both well-established proposals and some new ones that carry more uncertainty. Key
to her corporate tax agenda is an increase in the statutory rate from 21% to 28%. While well
below the 35% rate that long prevailed prior to the TCJA, it would put the U.S. into the top 10
countries in the OECD with the highest corporate tax rates (see Chart 18).

Chart 18: Less Competitive U.S. Corporate Tax Rate Under Democrat Sweep…
Corporate tax rates for OECD countries, 2023
35

*Biden-Harris corporate tax proposal

30
25
20
15
10
5

Colombia
Portugal
Australia
Costa Rica
MexicoGermanyJapan
U.S.*
New Zealand
Italy
Chile
Korea
CanadaFranceNetherlands
Belgium
Spain
TurkeyU.K.
Luxembourg
Austria
World avg
IsraelDenmark
GreeceNorwaySlovakia
U.S.
SwedenEstonia
Finland
Iceland
LatviaSwitzerland
Czechia
PolandSlovenia
Lithuania
Ireland
Hungary0

Sources: Tax Foundation, The White House, Moody’s Analytics

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Assessing the Macroeconomic Consequences of Harris vs. Trump

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18

Harris would also raise the tax rate on the foreign earnings of U.S. multinationals from 10.5%
to 21%, and the IRA’s 1% excise tax on stock repurchases to 4%. Moreover, she has proposed
expanded limitations on deductions for compensation. Specifically, the budget would deny
deductions for all compensation above $1 million paid to employees of C corporations.
Finally, it would also close the loophole for fund managers that allows them to treat carriedinterest like investment income for tax purposes.
Harris would also increase corporate taxes, including raising the new 15% alternative
minimum tax rate on corporations earning $1 billion or more per year, included as part of the
IRA, to 21%. This is a tax on book income—the income firms report on financial statements toshareholders and that reflects a company’s true financial performance. The IRA’s alternative
minimum tax has thus far proven to be a failure when it comes to increasing government
revenues. Its implementation was scheduled for 2023 but the IRS delayed enactment
because of various unresolved complexities. The budget also adopts the undertaxed profits
rule, which would mimic the OECD’s global minimum tax rules. This grants the U.S. theauthority to levy additional taxes on firms that are subsidiaries of multinational corporations
that pay less than the 15% global minimum rate in another country.
We estimate that Harris’ corporate tax changes would increase the effective corporate tax
rate from close to 12% to more than 19% a decade from now. This would be the highest
effective corporate tax rate since before the financial crisis. In their totality, Harris’ tax
reforms would raise the most revenue as a percent of GDP since the 1950s (see Chart 19).

Chart 19: …But Raises Lots of Revenue
Avg annual revenue raised following 1-2 yrs after enactment, % of GDP
5
4

X-axis: major tax legislation since WWI

3
2
1
0

Sources: Romer & Romer, U.S. Treasury, Moody’s Analytics

STIFFER IMMIGRATION RESTRICTIONSOn immigration, she has given her support to the recent Senate immigration reform bill thattakes a tougher stance on unauthorized immigration across the southern border. Moreover,as in the Biden-Harris administration’s fiscal 2025 budget, she would also ask for funding for
1,300 more border patrol agents, 375 immigration judges, and 1,600 asylum officers as wellas various technological investments to combat drug-trafficking. The budget also increases
the annual cap on the number of refugees admitted to the U.S. to 125,000, approximately
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Assessing the Macroeconomic Consequences of Harris vs. Trump

August 202419

double what it was in 2023. We also expect Harris to propose reforms much like those in
the immigration bill President Biden delivered to Congress early in his term, which included
pathways for more undocumented immigrants and individuals protected by the Deferred
Action for Childhood Arrivals policy to apply for and obtain legal status and citizenship.
STUDENT LOANS & MINIMUM WAGE
The Biden-Harris administration has touted its success in canceling more than $160 billion
in federal student loans, and we would expect Harris to pursue efforts to ease the financialpressure of student loan debt. Efforts earlier in the administration to forgive between $10,000
and $20,000 in student debt for every borrower were blocked by the Supreme Court. The
administration’s latest proposal would seek to resurrect this policy, but from a different angle.
The new plan would provide relief in the form of full or partial forgiveness for five kinds ofborrowers: (1) those eligible for forgiveness on an existing plan but have not enrolled, (2) those
whose balances now exceed the amount initially borrowed due to interest accumulation, (3)those who have been in repayment for 20 or more years, (4) those enrolled in “low-financialvalue” programs, and (5) those experiencing hardship in paying back loans. Estimates of the
proposed cost range from $220 billion to $750 billion, depending on the administration’s
ambiguous definition of “financial hardship.”Harris may also support a $15 per hour federal minimum wage. It is a key component of the
Democratic policy platform and President Biden raised the minimum wage to $15 for all federal
employees and contractors by executive order in 2022. Thus, it is possible that Harris and acooperative Democrat-led Congress would seek to increase the federal minimum wage if she iselected, but since it has not been part of her campaign, we do not include it in our assessment.10

10 The evidence on the employment and price effects of a minimum wage increase are mixed. However, in general,
employment effects lean negative, particularly where the minimum wage binds, while labor supply tends to rise forcertain demographics. There is little consensus on the extent to which minimum wage hikes are passed through toconsumers as higher prices, though low-wage industries do appear to be where inflation increases.
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Assessing the Macroeconomic Consequences of Harris vs. Trump

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APPENDIX B: TRUMP’S ECONOMIC POLICIESTo determine the economic policies that former President Trump will pursue if elected toa second term and are included in our Republican Sweep and Trump & Divided Congress
scenarios, we rely on his campaign website, speeches, press announcements, interviews,
and public commentary from campaign advisors to glean his policy positions. The budget
scores are based on estimates from the Congressional Budget Office and simulations of ourglobal macroeconomic model.
LOWER TAXESThe Tax Cuts and Jobs Act of 2017 was the signature piece of economic legislation passed in
Trump’s first term, and with several provisions of the TCJA set to expire at the end of 2025,
taxes will be at the top of Trump’s economic policy agenda should he win the election. In a
recent speech to private donors, a campaign official noted that “extending the Trump tax
cuts” is a key issue this election cycle. Trump’s campaign website shares that “President
Trump’s vision for America’s economic revival is lower taxes, bigger paychecks, and more jobs
for American workers.” For personal income taxes, this would imply an extension of current
tax rates for all taxpayers. This translates into an effective personal income tax rate acrosstaxpayers of less than 10%. In addition, Trump and his advisors have discussed reducing thestatutory corporate tax rate from its current 21% to 15%, reducing the effective corporate tax
rate to approximately 7% of profits.
AXE THE IRA
The Inflation Reduction Act of 2022 was a significant legislative achievement for President
Biden and will be in the crosshairs if Trump is reelected. The IRA was passed on a partisan
basis through the budget reconciliation process and has thus been targeted by congressional
Republicans. Project 2025, a policy agenda crafted by the conservative Heritage Foundation
think tank, calls for “the rescinding of all funds not already spent” by the IRA. Trump hasdisavowed Project 2025, but nonetheless has expressed warmth toward its IRA-related
proposals, at least indirectly.
Trump would dismantle much of the IRA if he had his way. The primary targets will befunding for clean energy initiatives, subsidies and other programs to combat climate change,
and conservation. The IRA’s tax credits for electric vehicles and clean energy projects areespecially vulnerable. The additional funds allocated to the Internal Revenue Service in the
IRA to increase enforcement and raise more revenues to pay for the IRA have been muchmaligned by Republicans, so we expect Trump to slash what is left of the IRS’s additional
budget authority.
Given that Trump’s pitch to voters in 2024 includes his actions taken during his first term tolower prescription drug prices and enhance medical price transparency, we do not expect
him to reverse IRA provisions meant to lower drug prices. We also expect the funding for
agriculture in the IRA to be left untouched, since at the height of the trade war in his firstterm Trump mobilized the federal government to subsidize, and in some cases bail out,
farmers pinched by high tariffs on U.S. farm exports.
HIGHER TARIFFS
A trade war with China characterized most of Trump’s first term, and we can expect evermore vigorous efforts to restrict trade in his second term, as the former president has
consistently touted protectionism on the campaign trail. Most significantly, this entails
a 10% tariff on nearly all imported goods (see Chart 20). Trump has also threatened 60%
tariffs on Chinese imports. Together, this would push the effective tariff rate up from 3% to ahistorically high 19% (see Chart 21). Given U.S. reliance on a wide range of essential Chinese
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21

Chart 20: Scope and Scale of Tariff Impact
Trade volume measures, %, share of domestic demand

Share of U.S. imports by goods, 2023

14

Other
8.4%

12

Food products
6.8%

Transportation
11.1%

10

Mineral products(incl oil)
10.4%

8

Chemicals,
plastics, rubbers
15.1%

6
4

Wood and
paper
2.2%

Machines(ex transpo.)
29.1%

2
0
80

85

90
95
00
Imports: goods
Exports: goods

05
10
15
Imports: services
Exports: services

20

Stone and
glass
0.9%

Metals (incl. precious)
8.9%

Textiles andapparel
7.1%

Sources: BEA, Moody’s Analytics

Chart 21: Trump Tariffs Would Significantly Raise the Effective Tariff Rate
Effective tariff rate*
12
10
8
6
4
2
0
48

52

56

60

64

68

72

76

80

U.S.

84

88

92

96

00

04

08

12

16

20

Euro area*Import duty revenues as share of total goods imports

Sources: Department of Commerce, World Bank, Goldman Sachs Global Investment Research, Moody’s Analytics

goods, we assume Trump will scale back the tariffs on Chinese imports to 10%, comparable
to the tariffs on other countries. As in the trade wars during Trump’s first term, we expect
many U.S. trading partners will respond with higher tariffs of their own on U.S. goods
they are importing. To determine the magnitude of those tariff hikes we rely on the expert
judgement of our country economists that weigh a wide range of economic, political andgeopolitical factors.
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Assessing the Macroeconomic Consequences of Harris vs. Trump

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22

DEPORTATIONS
Trump has been highly critical of the Biden administration’s handling of the surge ofimmigrants coming across the southern border into the U.S. He pledges on his campaign site
to “shut down Biden’s border disaster…end catch-and-release, restore Remain in Mexico,and eliminate asylum fraud.” And he vows to order “the largest deportation in the history of
our country.” Indeed, there has been a surge in immigration across the U.S.-Mexico borderunder Biden, with 8 million encounters since 2021 compared with 2.3 million in Trump’s fouryear term and 3.3 million during Obama’s eight years (see Chart 22).

Chart 22: Immigration Poses Challenges but Powers Growth
Net foreign immigration, mil
3.5

The “other” category includes those who entered lawfully through parole
authority and await immigration court, entered illegally and have not obtained
permanent legal status, or overstayed a temporary visa.

3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0

00

02

04
06
08
Legal permanent residents+

10
12
Nonimmigrants

14
Other

16

18
20
Total immigration

22

Sources: CBO, Moody’s Analytics

Given the president’s broad powers to enforce border policy, he does not need approval from
Congress to make significant changes. He is thus expected to quickly reinstate policies suchas Title 42 and Remain in Mexico that work to limit entry by unauthorized immigrants. Trump
has also said he wants to deport millions of unauthorized immigrants living and working in
the country. Using the largest deportation operation in American history, which took place inthe 1950s when 1.3 million illegal Mexican immigrants were expulsed under the Eisenhoweradministration as a guide, Trump could deport as many as 1 million immigrants annually. We
do not expect Trump to make significant changes to policies related to legal immigration.

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Assessing the Macroeconomic Consequences of Harris vs. Trump

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23

APPENDIX C: RETALIATION TO TRUMP TARIFFS
Former President Trump’s policy to impose a historically large increase in tariffs on all goods
imported into the U.S. has been a central part of his reelection bid. On the campaign trail,
he often talks about a 60% tariff on Chinese goods coming into the U.S., and a 10% tariff onimported goods from other countries, whether they be adversaries or allies.
If the tariffs are implemented as Trump has proposed, the U.S. effective tariff rate would
jump from an estimated just over 3% to near 19%. This would be a complete repudiationof U.S. trade policy since World War II, which saw a steady decline in tariffs. In the nearly
two decades prior to Trump’s first term, the U.S. all but stopped charging tariffs onimported goods.
If Trump is reelected president, we do not expect him to fully implement tariffs to the extent
he has proposed, but even a step in this direction would have a meaningful impact on
inflation, interest rates and growth, especially if other countries respond to the increase in
U.S. tariffs by increasing their tariffs on imported goods coming from the U.S. Judging fromtheir responses to U.S. tariff hikes during Trump’s first term, many surely would.
To this end, we have asked our country economists to assess whether the governments of thecountries they follow would retaliate if the U.S. increases tariffs on their goods, and to what degree,
under both the Republican Sweep and Trump & Divided Congress scenarios (see Chart 23).

Chart 23: Global Retaliation to Higher U.S. Tariffs
Tariff rate on goods imported from the U.S. in Republican Sweep scenario, %10%
7% to 9.9%
0.1% to 6.9%
No change

Source: Moody’s Analytics

Given the tensions between the U.S. and China, and judging from China’s quick retaliation to
the tariffs Trump imposed on Chinese goods in his first term, we would expect the Chinese torespond quickly and in-kind to any future tariff increases by the U.S. Mexico would respondsimilarly, and has said as much when Trump threatened higher tariffs on Mexican goods
unless Mexico stemmed the flow of immigrants crossing into the U.S.

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24

European nations will respond to higher U.S. tariffs, but will likely show some restraint intheir response. This was the case during Trump’s first term, when Europe responded to theimposition of tariffs on steel and aluminum, but limited its retaliation to a small number ofmeasures targeted at politically sensitive U.S. exports such as Harley-Davidson motorcycles
and bourbon. The key difference this go-around is that the assumed U.S. tariffs would beuniversal rather than applied to specific industries and products. This points to a more
universal response from Europe, and we assume that Europe responds with a similar tariff
hike on U.S. goods. One big exemption is likely to be energy products imported from the U.S.
These account for a quarter of Europe’s imports from the U.S., and European policymakers
will be wary of driving prices higher again with households only just recovering from theenergy price crunch of the past two years precipitated by Russia’s war in Ukraine.
The Canadians are also expected to respond to higher U.S. tariffs in part because Prime
Minister Trudeau faces a tough reelection in 2025, and it would likely be politically popular
to retaliate. But given concerns over a tit-for-tat trade war breaking out, Canada would most
likely respond with only a partial in-kind retaliation. Japan’s retaliatory measures will also be
more restrained and limited to goods such as low-end electronics, machinery and cars. No
tariffs will be imposed on critical energy and food imports from the U.S.
Mostly for geopolitical reasons, a number of countries are not expected to retaliate in
response to higher U.S. tariffs. Australia has recently entered into a security agreement with
the U.S. that will need support from the new Trump administration. Slapping higher tariffs
on U.S. imports could upend that agreement. While India is less reliant on external trade tofuel its growth, the U.S. is nevertheless an important trade partner. The country will aim to
maintain its alliance, and retaliation is unlikely. Also, the Trump administration is likely toquickly put more economic and political pressure on Iran, and countries in the region thatare foes of Iran will want to encourage this by maintaining good relations with the U.S. Higher
tariffs on U.S. goods would be counterproductive in this regard.
While the threat of a tit-for-tat trade war breaking out will be high, we assume that this does
not happen, and the tariff hikes end with the retaliation by U.S. trading partners. This isroughly how the tariff wars in Trump’s first term played out. As the U.S. economy began to
struggle with the tariffs and trade disruptions, the Trump administration struck a deal with
China in early 2020 to deescalate tensions and for China to increase its purchases of U.S.
goods. The Chinese never followed through.

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Assessing the Macroeconomic Consequences of Harris vs. Trump

August 202425

Table 1: Economic Outlook Under Harris & Divided Congress (Baseline) Scenario
2024

2025

2026

2027

2028

2016-2020 2020-2024 2024-2028
Avg annual growth

Real GDP
2017$% change

22,942.0 23,342.2
2.5
1.7

23,786.8 24,309.5 24,883.5
1.9
2.2
2.4

1.4

3.2

2.1

Avg annual growth

Nonfarm employment
Mil
Change, ths

158.5
2,452

159.6
1,042

160.1
542

160.6
494

161.1
524

-0.4

2.8

Unemployment rate, %

4.0

4.1

4.0

4.0

4.0

5.0

4.9

0.4
Avg
4.0

Labor force participation rate, %

62.7

62.7

62.5

62.5

62.4

62.7

62.4

62.3

Real disposable income per household
2017$
130,882% change
1.2

132,300
1.1

133,933
1.2

136,069
1.6

138,423
1.7

3.6

-0.0

1.4

Avg annual growth

FHFA House Price Index
Index% change

421.6
5.0

427.5
1.4

432.6
1.2

440.2
1.8

450.5
2.3

6.3

10.0

1.7

Consumer Price Index% change

3.0

2.4

2.3

2.2

2.2

1.9

4.9

2.3

3.4

2.6

2.5

2.3

2.2

2.0

4.5

2.4

S&P Stock Price Index
Index% change

5,198.8
21.3

5,367.4
3.2

5,600.7
4.3

5,943.3
6.1

6,284.5
5.7

11.4

12.7

4.9

Broad dollar index
Index% change

118.7
-1.5

112.4
-5.3

111.4
-0.8

111.0
-0.4

110.7
-0.3

1.0

0.2

-1.7

3,209.2
7.9

3,138.1-2.2

3,148.7
0.3

3,287.7
4.4

3,476.2
5.7

4.1

10.1

2.0

Federal funds rate, %

5.2

4.3

3.3

2.9

2.9

1.2

Avg
2.5

3.7

10-yr Treasury yield, %

4.3

4.1

4.1

4.0

4.0

2.0

2.7

4.1

Federal budget deficit, $ bil% of GDP-1,550.1-5.4-1,582.2-5.3-1,583.4-5.1-1,649.0-5.1-1,779.0
-5.3

-6.2

-8.8

-5.2

Federal debt-to-GDP ratio, %

99.0

100.3

102.0

103.4

104.9

82.3

98.4

101.9

Core CPI% change

Corporate profits after taxes$ bil% change

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

26

Table 2: Economic Outlook Under Republican Sweep Scenario
2024

2025

2026

2027

2028

22,942.0 23,033.4
2.5
0.4

23,052.1
0.1

23,496.7
1.9

24,157.8
2.8

2016-2020 2020-2024 2024-2028
Avg annual growth

Real GDP
2017$% change

1.4

3.2

1.3

Avg annual growth

Nonfarm employment
Mil
Change, ths

158.5
2,452

158.6
75

157.2
-1,368

157.4
189

158.0
585

-0.4

2.8

Unemployment rate, %

4.0

4.4

5.1

4.8

4.5

5.0

4.9

-0.1
Avg
4.6

Labor force participation rate, %

62.7

62.6

62.4

62.2

62.1

62.7

62.2

62.4

Real disposable income per household
2017$
130,882% change
1.2

131,9380.8

132,4190.4

134,0191.2

136,259
1.7

3.6

-0.0

1.0

Avg annual growth

FHFA House Price Index
Index% change

421.6
5.0

426.3
1.1

430.4
1.0

437.9
1.7

446.8
2.0

6.3

10.0

1.5

Consumer Price Index% change

3.0

3.5

3.1

2.3

2.2

1.9

4.9

2.8

Core CPI% change

3.4

3.5

3.4

2.4

2.2

2.0

4.5

2.9

5,198.8
21.3

5,265.1
1.3

5,405.9
2.7

5,746.0
6.3

6,133.8
6.7

11.4

12.7

4.2

118.7
-1.5

114.4
-3.6

110.8
-3.1

107.9
-2.6

105.5
-2.2

1.0

0.2

-2.9

3,209.2
7.9

2,965.0-7.6

2,969.6
0.2

3,206.7
8.0

3,525.6
9.9

4.1

10.1

2.4

Federal funds rate, %

5.2

4.6

3.6

2.7

2.3

1.2

Avg
2.5

3.7

10-yr Treasury yield, %

4.3

4.4

4.4

4.4

4.4

2.0

2.7

4.4

Federal budget deficit, $ bil% of GDP-1,550.1-5.4-1,780.5-6.1-1,943.6-6.4-2,014.6-6.4-2,059.2
-6.2

-6.2

-8.8

-6.1

Federal debt-to-GDP ratio, %

99.0

106.1

110.2

112.5

113.9

82.3

98.4

108.3

S&P Stock Price Index
Index% change
Broad dollar index
Index% change
Corporate profits after taxes$ bil% change

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

27

Table 3: Economic Outlook Under Various Scenarios
2024
Real GDP
Baseline, 2017$% change
Republican Sweep, 2017$% change
Difference from baseline, %Trump & Divided Congress, 2017$% change
Difference from baseline, %Democrat Sweep, 2017$% change
Difference from baseline, %Nonfarm employment
Baseline, mil
Change, ths
Republican Sweep, mil
Change, ths
Difference from baseline, ths
Trump & Divided Congress, mil
Change, ths
Difference from baseline, ths
Democrat Sweep, mil
Change, ths
Difference from baseline, ths

2025

2026

2027

2028

2016-2020 2020-2024 2024-2028
Avg annual growth

22,942.0 23,342.2 23,786.8 24,309.5 24,883.5
2.5
1.7
1.9
2.2
2.4
22,942.0 23,033.4 23,052.1 23,496.7 24,157.8
2.5
0.4
0.1
1.9
2.8
0.0
-1.3
-3.1
-3.3
-2.9
22,942.0 23,203.3 23,420.3 23,877.9 24,477.7
2.5
1.1
0.9
2.0
2.5
0.0
-0.6
-1.5
-1.8
-1.6
22,942.0 23,471.7 23,984.1 24,527.7 25,077.2
2.5
2.3
2.2
2.3
2.2
0.0
0.6
0.8
0.9
0.8

158.5
2,451.5
158.5
2,451.50
158.5
2,451.50
158.5
2,451.5
0

159.6
1,042.5
158.6
75.3
-967
159.0
524.7
-518
159.9
1,338.4
296

160.1
542.4
157.2
-1,367.6-2,877158.6-419.3-1,479
160.7
879.6
633

160.6
494.1
157.4
189.3
-3,182
158.9
237.3-1,736
161.4
698.7
838

161.1
524.1
158.0
585.3
-3,121
159.4
546.1-1,714
161.9
425.0
738

1.4

3.2

2.1

1.4

3.2

1.3

1.4

3.2

1.6

1.4

3.2

2.2

-0.4

2.8

0.4

-0.4

2.8

-0.1

-0.4

2.8

0.1

-0.4

2.8

0.5

Avg
Unemployment rate
Baseline, %Republican Sweep, %Difference from baseline, ppt
Trump & Divided Congress, %Difference from baseline, ppt
Democrat Sweep, %Difference from baseline, ppt

4.0
4.0
0.0
4.0
0.0
4.0
0.0

4.1
4.4
0.4
4.3
0.3
4.0
-0.1

4.0
5.1
1.1
4.8
0.8
3.9
-0.1

4.0
4.8
0.9
4.7
0.7
3.9
-0.1

4.0
4.5
0.5
4.4
0.4
3.9
-0.0

5.0
5.0

4.9
4.9

4.0
4.6

5.0

4.9

4.4

5.0

4.9

3.9

Labor force participation rate
Baseline, %Republican Sweep, %Difference from baseline, ppt
Trump & Divided Congress, %Difference from baseline, ppt
Democrat Sweep, %Difference from baseline, ppt

62.7
62.7
0.0
62.7
0.0
62.7
0.0

62.7
62.6
-0.0
62.6
-0.0
62.7
0.1

62.5
62.4
-0.1
62.5
-0.1
62.8
0.2

62.5
62.2
-0.2
62.3
-0.1
62.8
0.3

62.4
62.1
-0.3
62.2
-0.2
62.7
0.3

62.7
62.7

62.4
62.2

62.3
62.4

62.7

62.2

62.5

62.7

62.2

62.7

130,882
1.2
130,8821.2
0.0
130,8821.2
0.0
130,882

132,300
1.1
131,9380.8-0.3
132,379
1.1
0.1
132,887

133,933
1.2
132,4190.4-1.1
133,4210.8-0.4
133,238

136,069
1.6
134,0191.2-1.5
135,3231.4-0.5
135,619

138,423
1.7
136,259
1.7-1.6
137,693
1.8-0.5
137,759

Real disposable income per household
Baseline, 2017$% change
Republican Sweep, 2017$% change
Difference from baseline, %Trump & Divided Congress, 2017$% change
Difference from baseline, %Democrat Sweep, 2017$
Moody’s Analytics

Avg annual growth

Assessing the Macroeconomic Consequences of Harris vs. Trump

3.6

-0.0

1.4

3.6

-0.0

1.0

3.6

-0.0

1.3

August 2024

28

Table 3: Economic Outlook Under Various Scenarios (Cont.)
2024
1.2
0.0

2025
1.5
0.4

2026
0.3
-0.5

2027
1.8
-0.3

2028
1.6
-0.5

FHFA House Price Index
Baseline, index% change
Republican Sweep, index% change
Difference from baseline, %Trump & Divided Congress, index% change
Difference from baseline, %Democrat Sweep, index% change
Difference from baseline, %

421.6
5.0
421.6
5.0
0.0
421.6
5.0
0.0
421.6
5.0
0.0

427.5
1.4
426.3
1.1
-0.3
427.4
1.4
-0.0
427.4
1.4
-0.0

432.6
1.2
430.4
1.0
-0.5
433.1
1.3
0.1
432.7
1.2
0.0

440.2
1.8
437.9
1.7
-0.5
440.7
1.8
0.1
440.8
1.9
0.1

450.5
2.3
446.8
2.0
-0.8
450.2
2.2
-0.0
452.0
2.5
0.3

Consumer Price Index
Baseline, % change yr ago
Republican Sweep, % change
Difference from baseline, ppt
Trump & Divided Congress, % change
Difference from baseline, ppt
Democrat Sweep, % change
Difference from baseline, ppt

3.0
3.0
0.0
3.0
0.0
3.0
0.0

2.4
3.5
1.1
2.9
0.5
2.4
0.0

2.3
3.1
0.8
2.7
0.3
2.4
0.0

2.2
2.3
0.1
2.2
0.0
2.2
0.0

Core CPI
Baseline, % change yr ago
Republican Sweep, % change
Difference from baseline, ppt
Trump & Divided Congress, % change
Difference from baseline, ppt
Democrat Sweep, % change
Difference from baseline, ppt

3.4
3.4
0.0
3.4
0.0
3.4
0.0

2.6
3.5
0.8
3.0
0.4
2.6
0.0

2.5
3.4
0.9
2.9
0.4
2.5
0.0

S&P Stock Price Index
Baseline, index% change
Republican Sweep, index% change
Difference from baseline, %Trump & Divided Congress, index% change
Difference from baseline, %Democrat Sweep, index% change
Difference from baseline, %5,198.8
21.3
5,198.8
21.3
0.0
5,198.8
21.3
0.0
5,198.8
21.3
0.0

5,367.4
3.2
5,265.1
1.3-1.9
5,286.5
1.7-1.5
5,359.1
3.1-0.2

Broad dollar index
Baseline, index% change
Republican Sweep, index% change
Difference from baseline, %Trump & Divided Congress, index% change
Difference from baseline, %Democrat Sweep, index% change
Difference from baseline, %

118.7
-1.5
118.7
-1.5
0.0
118.7
-1.5
0.0
118.7
-1.5
0.0

112.4
-5.3
114.4
-3.6
1.8
113.4
-4.5
0.9
112.1
-5.6
-0.3

% change
Difference from baseline, %Moody’s Analytics

2016-2020 2020-2024 2024-2028
3.6
-0.0
1.3

6.3

10.0

1.7

6.3

10.0

1.5

6.3

10.0

1.7

6.3

10.0

1.8

2.2
2.2
0.1
2.2
0.0
2.2
0.0

1.9
1.9

4.9
4.9

2.3
2.8

1.9

4.9

2.5

1.9

4.9

2.3

2.3
2.4
0.1
2.3
0.0
2.3
0.0

2.2
2.2
-0.0
2.3
0.0
2.3
0.0

2.0
2.0

4.5
4.5

2.4
2.9

2.0

4.5

2.6

2.0

4.5

2.4

5,600.7
4.3
5,405.9
2.7-3.5
5,454.7
3.2-2.6
5,533.0
3.2-1.2

5,943.3
6.1
5,746.0
6.3-3.3
5,779.6
6.0-2.8
5,798.4
4.8-2.4

6,284.5
5.7
6,133.8
6.7-2.4
6,133.7
6.1-2.4
6,064.7
4.6
-3.5

111.4
-0.8
110.8
-3.1
-0.5
111.5
-1.7
0.1
111.0
-0.9
-0.4

111.0
-0.4
107.9
-2.6
-2.8
109.9
-1.5
-1.0
110.9
-0.1
-0.1

110.7
-0.3
105.5
-2.2
-4.7
108.3
-1.5
-2.2
110.6
-0.2
-0.0

Avg annual growth

Assessing the Macroeconomic Consequences of Harris vs. Trump

11.4

12.7

4.9

11.4

12.7

4.2

11.4

12.7

4.2

11.4

12.7

3.9

1.0

0.2

-1.7

1.0

0.2

-2.9

1.0

0.2

-2.3

1.0

0.2

-1.7

August 2024

29

Table 3: Economic Outlook Under Various Scenarios (Cont.)
Corporate profits after taxes
Baseline, $ bil% change
Republican Sweep, $ bil% change
Difference from baseline, %Trump & Divided Congress, $ bil% change
Difference from baseline, %Democrat Sweep, $ bil% change
Difference from baseline, %

2024

2025

2026

2027

2028

3,209.2
7.9
3,209.2
7.9
0.0
3,209.2
7.9
0.0
3,209.2
7.9
0.0

3,138.1-2.2
2,965.0-7.6-5.5
3,015.5-6.0-3.9
2,924.4-8.9-6.8

3,148.7
0.3
2,969.6
0.2-5.7
3,010.9-0.2-4.4
2,935.6
0.4-6.8

3,287.7
4.4
3,206.7
8.0-2.5
3,180.1
5.6-3.3
3,030.8
3.2-7.8

3,476.2
5.7
3,525.6
9.9
1.4
3,420.6
7.6-1.6
3,221.2
6.3-7.3

2016-2020 2020-2024 2024-2028

4.1

10.1

2.0

4.1

10.1

2.4

4.1

10.1

1.6

4.1

10.1

0.1

Avg
Federal funds rate
Baseline, %Republican Sweep, %Difference from baseline, ppt
Trump & Divided Congress, %Difference from baseline, ppt
Democrat Sweep, %Difference from baseline, ppt

5.2
5.2
0.0
5.2
0.0
5.2
0.0

4.3
4.6
0.3
4.4
0.1
4.3
0.1

3.3
3.6
0.4
3.5
0.2
3.5
0.2

2.9
2.7
-0.2
2.9
-0.1
3.0
0.1

2.9
2.3
-0.6
2.7
-0.2
2.9
-0.0

10-yr Treasury yield
Baseline, %Republican Sweep, %Difference from baseline, ppt
Trump & Divided Congress, %Difference from baseline, ppt
Democrat Sweep, %Difference from baseline, ppt

4.3
4.3
0.0
4.3
0.0
4.3
0.0

4.1
4.4
0.3
4.2
0.1
4.2
0.0

4.1
4.4
0.3
4.2
0.1
4.1
0.1

4.0
4.4
0.4
4.2
0.1
4.1
0.0

4.0
4.4
0.4
4.1
0.1
4.0
0.0

Federal budget deficit
Baseline, $ bil% of GDP
Republican Sweep, $ bil% of GDP
Difference from baseline, %Trump & Divided Congress, $ bil% of GDP
Difference from baseline, %Democrat Sweep, $ bil% of GDP
Difference from baseline, %-1,550.1-5.4-1,550.1-5.4
0.0-1,550.1-5.4
0.0-1,550.1-5.4
0.0-1,582.2-5.3-1,780.5-6.1
12.5-1,696.2-5.7
7.2-1,422.3
-4.7
-10.1

-1,583.4-5.1-1,943.6-6.4
22.7-1,814.9-5.9
14.6-1,287.8
-4.1
-18.7

-1,649.0-5.1-2,014.6-6.4
22.2-1,904.8-6.0
15.5-1,376.5
-4.2
-16.5

-1,779.0-5.3-2,059.2-6.2
15.8-1,989.1-5.9
11.8-1,523.0
-4.5
-14.4

Federal debt-to-GDP ratio
Baseline, %Republican Sweep, %Difference from baseline, ppt
Trump & Divided Congress, %Difference from baseline, ppt
Democrat Sweep, %Difference from baseline, ppt

99.0
99.0
0.0
99.0
0.0
99.0
0.0

100.3
106.1
5.7
102.9
2.6
99.1
-1.2

102.0
110.2
8.2
106.0
4.0
99.2
-2.8

103.4
112.5
9.1
108.3
4.9
99.4
-4.0

104.9
113.9
9.0
110.0
5.1
100.0
-4.9

1.2

2.5

3.7

1.2

2.5

3.7

1.2

2.5

3.8

2.0
2.0

2.7
2.7

4.1
4.4

2.0

2.7

4.2

2.0

2.7

4.1

-6.2

-8.8

-5.2

-6.2

-8.8

-6.1

-6.2

-8.8

-5.8

-6.2

-8.8

-4.6

82.3
82.3

98.4
98.4

101.9
108.3

82.3

98.4

105.3

82.3

98.4

99.3

Sources: BEA, BLS, Census Bureau, Treasury, Federal Reserve, S&P, FHFA, Moody’s Analytics

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 202430

Table 4: Global Economic Impact of Republican Sweep and Trump & Divided
Congress Scenarios
Difference in real GDP between scenarios and baseline, %North America
United States
CanadaMexicoSouth America
Argentina
BrazilChile
Colombia
Peru
Venezuela
UruguayEuro zone
Austria
Belgium
Croatia
CyprusEstonia
FinlandFranceGermany
GreeceIreland
Italy
Lithuania
Luxembourg
LatviaMalta
Netherlands
Portugal
Slovakia
Slovenia
Spain
Other Western Europe
Denmark
NorwaySwedenSwitzerland
United Kingdom
Eastern Europe
Bulgaria
Czech RepublicHungary
PolandRumania
RussiaTurkeyUkraine
Oceania
Australia
New Zealand

Moody’s Analytics

Republican Sweep
2025Q42028Q4
-2.3
-2.6
-2.2
-2.8
-2.0
-1.1
-2.9
-1.5
-2.8
-2.9
-2.9
-3.0
-2.6
-2.8
-2.5
-2.0
-2.9
-2.7
-2.8
-2.3
-5.2
-5.1
-1.6
-2.0
-1.4
-0.9
-1.2
-0.5
-1.4
-0.9
-2.3
-0.4
-2.2
-2.4
-3.8
-1.8
-1.6
-0.8
-0.9
-0.9
-1.4
-0.5
-4.4
-2.1
-1.1
-2.7
-1.3
-1.3
-2.4
0.2
-2.0
-0.9
-2.3
-2.2
-1.3
-6.4
-1.3
-1.1
-1.7
-1.6
-3.2
-1.3
-3.0
-2.3
-1.1
-0.9
-1.4
-1.1
-0.6
-0.7
-0.6
-0.6
-1.2
-0.8
-1.3
-1.3
-1.7
-1.2
-2.0
-1.9
-2.0
-1.4
-1.4
-1.1
-1.6
-1.6
-1.9
-2.8
-2.7
-2.9
-2.2
-2.3
-1.4
-0.9
-2.5
-1.3
-1.7
-1.1
-1.6
-1.1
-1.8
-0.8

Assessing the Macroeconomic Consequences of Harris vs. Trump

Trump & Divided Congress
2025Q42028Q4
-1.1
-1.5
-1.1
-1.6
-1.0
-0.6
-1.5
-1.0
-1.1
-1.2
-1.2
-1.3
-0.9
-1.1
-1.3
-0.9
-1.2
-1.5
-1.3
-1.1
-3.4
-2.6
-0.8
-1.0
-0.7
-0.5
-0.6
-0.3
-0.7
-0.5
-1.2
-0.6
-1.1
-1.5
-2.0
-1.1
-0.8
-0.4
-0.4
-0.5
-0.8
-0.2
-2.2
-1.1
-0.5
-1.4
-0.7
-0.7
-1.2
0.2
-1.0
-0.3
-1.2
-1.1
-0.9
-4.0
-0.7
-0.7
-0.8
-0.9
-1.6
-0.7
-1.5
-1.4
-0.5
-0.6
-0.7
-0.6
-0.3
-0.4
-0.3
-0.3
-0.6
-0.4
-0.7
-0.7
-0.8
-0.7
-1.0
-1.0
-0.8
-0.7
-0.8
-0.6
-0.8
-0.9
-1.0
-1.6
-1.3
-1.5
-1.1
-1.2
-0.9
-0.7
-1.3
-0.6
-0.9
-0.5
-0.9
-0.5
-0.9
-0.4

August 2024

31

Table 4: Global Economic Impact of Republican Sweep and Trump & Divided
Congress Scenarios (Cont.)
Difference in real GDP between scenarios and baseline, %Republican Sweep
2025Q42028Q4
-2.1
-1.8
-1.7
-1.7
-1.2
-0.9
-2.0
-3.0
-0.9
-0.4
-1.4
-0.9
-2.6
-2.8
-1.8
-2.5
-1.9
-1.9
-1.9
-2.0
-2.3
-1.9
-4.5
-1.0
-1.9
-1.9
-1.9
-1.9
-2.1
-2.2
-1.6
-0.7
-2.5
-2.7
-4.9
-2.0
-1.6
-1.5
-0.5
-0.3
-1.9
-1.0
-6.8
-2.8
-0.7
-1.6
-2.2
-2.1
-0.4
-1.1
-4.2
-3.8
-2.6
-2.9
-1.1
-1.1
-1.5
-2.4
-1.7
-2.5

Middle East/Africa
Algeria
Bahrain
Egypt
IsraelJordanLebanonNigeria
Oman
Qatar
KuwaitSouth Africa
Saudi Arabia
United Arab Emirates
Asia
Cambodia
China
Hong Kong
India
Indonesia
Japan
Laos
Myanmar
Malaysia
Philippines
Singapore
TaiwanThailandSouth Korea
Vietnam

Trump & Divided Congress
2025Q42028Q4
-1.0
-0.9
-0.9
-0.9
-0.6
-0.4
-1.0
-1.5
-0.5
-0.2
-0.7
-0.5
-0.8
-1.0
-0.9
-1.3
-0.9
-1.0
-1.0
-0.9
-1.1
-1.0
-2.3
-0.5
-1.0
-1.0
-0.9
-1.0
-1.1
-1.1
-0.9
-0.4
-1.4
-1.4
-2.4
-0.6
-0.8
-0.8
-0.3
-0.1
-0.9
-0.6
-3.5
-1.4
-0.4
-0.8
-1.1
-1.1
-0.2
-0.6
-2.3
-2.2
-1.3
-1.4
-0.6
-0.6
-0.7
-1.2
-1.1
-1.9

Source: Moody’s Analytics

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

32

Table 5: Economic Outlook Under Trump & Divided Congress Scenario
2024

2025

2026

2027

2028

22,942.0 23,203.3 23,420.3
2.5
1.1
0.9

23,877.9
2.0

24,477.7
2.5

2016-2020 2020-2024 2024-2028
Avg annual growth

Real GDP
2017$% change

1.4

3.2

1.6

Avg annual growth

Nonfarm employment
Mil
Change, ths

158.5
2,452

159.0
525

158.6
-419

158.9
237

159.4
546

-0.4

2.8

Unemployment rate, %

4.0

4.3

4.8

4.7

4.4

5.0

4.9

0.1
Avg
4.4

Labor force participation rate, %

62.7

62.6

62.5

62.3

62.2

62.7

62.2

62.5

Real disposable income per household
2017$
130,882% change
1.2

132,379
1.1

133,4210.8

135,323
1.4

137,693
1.8

3.6

-0.0

1.3

Avg annual growth

FHFA House Price Index
Index% change

421.6
5.0

427.4
1.4

433.1
1.3

440.7
1.8

450.2
2.2

6.3

10.0

1.7

Consumer Price Index% change

3.0

2.9

2.7

2.2

2.2

1.9

4.9

2.5

3.4

3.0

2.9

2.3

2.3

2.0

4.5

2.6

S&P Stock Price Index
Index% change

5,198.8
21.3

5,286.5
1.7

5,454.7
3.2

5,779.6
6.0

6,133.7
6.1

11.4

12.7

4.2

Broad dollar index
Index% change

118.7
-1.5

113.4
-4.5

111.5
-1.7

109.9
-1.5

108.3
-1.5

1.0

0.2

-2.3

3,209.2
7.9

3,015.5-6.0

3,010.9-0.2

3,180.1
5.6

3,420.6
7.6

4.1

10.1

1.6

Federal funds rate, %

5.2

4.4

3.5

2.9

2.7

1.2

Avg
2.5

3.7

10-yr Treasury yield, %

4.3

4.2

4.2

4.2

4.1

2.0

2.7

4.2

Federal budget deficit, $ bil% of GDP-1,550.1-5.4-1,696.2-5.7-1,814.9-5.9-1,904.8-6.0-1,989.1
-5.9

-6.2

-8.8

-5.8

Federal debt-to-GDP ratio, %

99.0

102.9

106.0

108.3

110.0

82.3

98.4

105.3

Core CPI% change

Corporate profits after taxes$ bil% change

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

33

Table 6: Economic Outlook Under Democrat Sweep Scenario
2024

2025

2026

2027

2028

2016-2020 2020-2024 2024-2028

22,942.0
2.5

23,471.7
2.3

23,984.1
2.2

24,527.7
2.3

25,077.2
2.2

Nonfarm employment
Mil
Change, ths

158.5
2,452

159.9
1,338

160.7
880

161.4
699

161.9
425

-0.4

2.8

Unemployment rate, %

4.0

4.0

3.9

3.9

3.9

5.0

4.9

0.5
Avg
3.9

Labor force participation rate, %

62.7

62.7

62.8

62.8

62.7

62.7

62.2

62.7

Real disposable income per household
2017$
130,882% change
1.2

132,887
1.5

133,2380.3

135,619
1.8

137,759
1.6

3.6

-0.0

1.3

Avg annual growth

Real GDP
2017$% change

1.4

3.2

2.2

Avg annual growth

Avg annual growth

FHFA House Price Index
Index% change

421.6
5.0

427.4
1.4

432.7
1.2

440.8
1.9

452.0
2.5

6.3

10.0

1.8

Consumer Price Index% change

3.0

2.4

2.4

2.2

2.2

1.9

4.9

2.3

3.4

2.6

2.5

2.3

2.3

2.0

4.5

2.4

S&P Stock Price Index
Index% change

5,198.8
21.3

5,359.1
3.1

5,533.0
3.2

5,798.4
4.8

6,064.7
4.6

11.4

12.7

3.9

Broad dollar index
Index% change

118.7
-1.5

112.1
-5.6

111.0
-0.9

110.9
-0.1

110.6
-0.2

1.0

0.2

-1.7

3,209.2
7.9

2,924.4-8.9

2,935.6
0.4

3,030.8
3.2

3,221.2
6.3

4.1

10.1

0.1

Federal funds rate, %

5.2

4.3

3.5

3.0

2.9

1.2

Avg
2.5

3.8

10-yr Treasury yield, %

4.3

4.2

4.1

4.1

4.0

2.0

2.7

4.1

Federal budget deficit, $ bil% of GDP-1,550.1-5.4-1,422.3-4.7-1,287.8-4.1-1,376.5-4.2-1,523.0
-4.5

-6.2

-8.8

-4.6

Federal debt-to-GDP ratio, %

99.0

99.1

99.2

99.4

100.0

82.3

98.4

99.3

Core CPI% change

Corporate profits after taxes$ bil% change

Sources: BEA, BLS, Census Bureau, Treasury, Moody’s Analytics

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

34

ABOUT THE AUTHORSMark Zandi is chief economist of Moody’s Analytics, where he directs economic research. Moody’s Analytics,
a subsidiary of Moody’s Corp., is a leading provider of economic research, data and analytical tools. Dr.
Zandi is a cofounder of Economy.com, which Moody’s purchased in 2005. Dr. Zandi is on the board of
directors of MGIC, the largest private mortgage insurance company in the U.S., and is the lead directorof PolicyMap, a data visualisation and analytics company, which is used by policymakers and commercial
businesses.
He is a trusted adviser to policymakers and an influential source of economic analysis for businesses,
journalists and the public. Dr. Zandi frequently testifies before Congress and conducts regular briefings
on the economy for corporate boards, trade associations, and policymakers at all levels.
Dr. Zandi is the author of Paying the Price: Ending the Great Recession and Beginning a New American
Century, which provides an assessment of the monetary and fiscal policy response to the Great Recession. His other book, Financial Shock: A 360° Look at the Subprime Mortgage Implosion, and How
to Avoid the Next Financial Crisis, is described by The New York Times as the “clearest guide” to thefinancial crisis.
Dr. Zandi is host of the Inside Economics podcast. Dr. Zandi earned his BS from the Wharton School at
the University of Pennsylvania.
Brendan LaCerda is a director and senior economist with Moody’s Analytics. Brendan serves as thelead analyst for the Canadian economic forecast. His primary responsibilities also include the development and improvement of country forecast models. His research is primarily focused on international
macroeconomics, healthcare and fiscal policy. Before joining Moody’s Analytics, Brendan worked asa senior economist with IHS Global Insight’s U.S. Macroeconomic Service. Brendan received his PhD
in economics from the University of Virginia. He pursued his undergraduate education at the London
School of Economics and the University of Notre Dame, where he graduated with a BA in economics
and mathematics.
Justin Begley is a U.S.-based economist at Moody’s Analytics. He covers the economies of Minnesota,
Alabama, Wyoming, and several U.S. metro areas. His research focuses on U.S. fiscal policy, geopolitical risk, and the U.S. labor market. He also works on developing models to forecast high-frequency dataof the U.S. economy and is a regular contributor to Economic View. Prior to joining Moody’s Analytics,
Justin held fellowships at Florida State University and in political economy at the Mercatus Center at
George Mason University. Justin holds a master’s of science in economics from Florida State University
and a bachelor’s degree in finance and economics from Canisius College.

Moody’s Analytics

Assessing the Macroeconomic Consequences of Harris vs. Trump

August 2024

35

About Moody’s Analytics
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Endnotes