“We estimate that if Trump wins in a sweep or with divided government, the hit to growth from tariffs and tighter immigration policy would outweigh the positive fiscal impulse” from maintaining most tax cuts, Goldman economists including Alec Phillips wrote in a note Tuesday.

Gross domestic product would see a peak hit of 0.5 percentage point in the second half of next year in that scenario, with the effects abating in 2026, the Goldman team estimated. They assumed a 20 percentage-point hike in China tariffs under Trump, along with higher duties on auto imports from Mexico and the European Union, and a reduction in immigration that would slow growth in the labor force.

Should Vice President Kamala Harris win and Democrats secure control of both chambers of Congress, “new spending and expanded middle-income tax credits would slightly more than offset lower investment due to higher corporate tax rates,” the Goldman economists wrote. That would result in “a very slight boost to GDP growth on average over 2025-2026.”

Harris Scenario

Should Harris win the White House in a divided-government scenario, where Republicans control at least one chamber of Congress, “the effects of policy changes would be small and neutral on net,” Phillips and his colleagues wrote.

The Trump and Harris campaigns didn’t immediately respond to requests for comment on the Goldman report.

With President Joe Biden already having taken steps to tighten immigration, Goldman expects a Harris administration to oversee a slowdown in new arrivals to 1.5 million a year — still higher than the pre-pandemic average of around 1 million. A Trump administration would likely prompt a sharper slowdown, to 1.25 million or — if Republicans take Congress and boost resources for enforcement — 750,000 a year.

A surge in immigration is viewed by many economists as having contributed to strong US employment growth in recent years, in the face of high interest rates. 

“We estimate that the contribution from immigration to labor force growth if Harris wins would be 10,000 per month higher than if Trump wins with divided government,” and 30,000 a month higher than if Republicans sweep, Goldman’s economists wrote. 

In trade policy, Goldman said it’s not expecting further tariff increases should Harris win. 

Trump’s likely tariff hikes on China, the EU and Mexico would lead to an inflationary bump, with a peak impact of 30 to 40 basis points on the Federal Reserve’s preferred price gauge, the bank’s economists wrote. An additional 10% universal tariff, which the GOP candidate has floated, would have a bigger impact though it would take longer.  

(Corrects magnitude of tariff hike in third paragraph.)