Trade, immigration, and fiscal policies are key areas of concern in the upcoming U.S. presidential election, but possible election sweeps in the Senate and House of Representatives are a concern too.
For trade policy, yes to raising tariffs—in particular imports from China and autos from Mexico and the E.U.—if former President Donald Trump wins re-election, but no to tariff increases should Vice President Kamala Harris win the White House, according to predictions from the Goldman Sachs economics team.
The Goldman economists said it is difficult to predict what trade policy might look like under a second Trump administration. Tariffs are expected to increase, but probably rise less than he has proposed. Support for tariffs appears mostly limited to imports from China. And while a president has more authority over areas such as trade and immigration, congressional control could still play a role, depending on whether there’s a one-party sweep or a divided government.
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As for immigration policy, the economists concluded that a Harris win would see net immigration slow to 1.5 million per year. In contrast, a Trump win—he’s already promised domestic deportation—with a divided government could see net immigration fall to 1.25 million. If Republicans sweep, Congress could see increased enforcement, and that could drop net immigration to 750,000.
As for the labor force, a Harris win could see labor growth at about 10,000 per month higher than if Trump wins on the back of immigration, presuming he wins with a divided government. But that number could rise higher to 30,000 if Trump wins in a Republican sweep, given plans for a significant pullback.
And for fiscal policy, a Democratic sweep would likely see personal and corporate taxes—as well as benefit spending—rise. In contrast, the expectation is little change in a Republican sweep. Goldman economists concluded that divided government scenarios could result in modest net increases in tax receipts, mostly because Congress “would likely allow the upper-income portion of the 2017 tax cuts to expire, but little change to benefit programs.”
A Harris win with a divided government is expected to see little impact from the effects of policy changes. But a Democratic sweep would likely give a slight boost to GDP growth over 2025 to 2026. In contrast, the impact from tariffs and a tighter immigration policy would likely hurt GDP growth in the back half of 2025, whether Trump wins with either a Republican sweep or a divided government.
So what does all that mean for fashion companies and retailers? A Trump win would see quick escalation on tariffs, raising the PCE (personal consumption expenditures) inflation likely three-fold. That move across a range of consumer expenses would also reflect changes in consumer behavior.
The economists said the “costs of future tariffs would fall 15 percent on foreign exporters, 15 percent on U.S. wholesalers or retailers, and 70 percent on U.S. consumers.” Domestic producers subject to tariffs would raise their own prices, while the increase in the cost of imported intermediate inputs—raw materials, semi-finished goods, and other pieces or services used in the production process—would see 70 percent of that rise be passed through to consumers in the form of higher prices. Retail trade groups oppose broad-based tariffs, noting that the pass along price increases are essentially a further tax on American consumers.
And regardless of party control, tax cuts enacted in 2017—including business tax incentives that are being phased out—are expected to be a key fiscal issue in 2025 as they expire at the end of next year. The economists expect that a 25-percent corporate tax rate is more likely than 28 percent. They also think that Democrats could temporarily extend or reinstate some business investment policies enacted in 2017, although probably not at the same generous rate.
Since Harris hasn’t disclosed her plan for the expiring tax cuts, the expectation is that she might discuss it at the debate with Trump Tuesday night in Philadelphia, the first time the two will meet in person. And while Trump has said he will extend the tax cuts—and has indicated plans to end taxation of Social Security benefits and cut the corporate tax rate to 15 percent for firms that make the products in the U.S.—the Goldman economists said the latter proposals are unlikely to pass.
TD Cowen Washington Research Group strategist Chris Krueger noted that Harris did unveil two tax policies: one is to raise the top rate for capital gains to 33 percent from 23.8 percent, and expand small business tax credit from $5,000 to $50,000. As for Trump’s plan for a 15-percent tax rate for companies making goods in America, Krueger said: “We have no idea how this 15 percent would be enforced, structured, or even pass into law.”
Krueger said that if Harris wins, a Democratic Senate majority would be “tough, but not impossible,” and could depend on the races in Texas and Florida. He expects that if Trump wins, the Senate will be “very likely GOP given Electoral College geographic overlap.”
“Should Trump win in a GOP sweep [of the House and Senate], we suspect he would read that as a MAGA (Make America Great Again) mandate for his America First policies. Unlike the first Trump Cabinet, we expect potential second term to be all gas, no brake,” he concluded.
Krueger’s colleague Jaret Seilberg, a managing director at the research group, believes that Trump would ease regulations, while Harris would double down on regulations, but she’s also “less likely to use tariffs or disrupt global trade.”
“We also believe divided government is key as a GOP Senate would limit whom Harris could confirm as regulators and a Democratic House would limit how Trump could adjust the tax code,” Seilberg concluded.
The current prediction forecasts for a Trump win would see a 32-percent probability of a Republican sweep. The chance of a divided government is far lower, at just 17 percent. A Harris win is expected in the context of a divided government, at 30 percent, rather than a Democratic sweep, at 21 percent.
