A Kamala Harris win and a Democratic sweep would give the biggest boost to the economy, Goldman Sachs says

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According to Goldman Sachs GS+1.19%, the best outcome of the 2024 election — for the U.S. economy — would be an overwhelming victory for Vice President Kamala Harris and her Democratic allies.

Conversely, Goldman believes a Republican sweep in Congress and win for Former President Donald Trump would diminish economic output next year. Most of the damage would stem from Trump's promises to be tougher on immigration and increase tariffs on imports coming from countries like China, analysts said in a note late on Tuesday.

"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," Goldman analysts wrote. "If Democrats sweep, new spending and expanded middle-income tax credits would slightly more than offset lower investment due to high corporate tax rates, resulting in a very slight boost to [gross domestic product] growth."

Harris's economic plan includes a push to restore the expanded Child Tax Credit, create a new tax credit that would give low-income or middle-income families with a newborn child $6,000, and slash taxes by up to $1,500 for low-income individuals. She has also pledged to take aim at high prescription drug prices, expensive grocery bills, and Wall Street's home buying spree.

Under a president Harris, job growth would be 10,000 a month higher than if Trump wins with a divided government and 30,000 higher than a Republican takeover of Congress and the White House, according to Goldman. The contribution of workers to the labor force from immigration would also be much greater under a Harris administration, which would slow immigration, but at a weaker pace than a potenital Trump White House.

Trump has proposed imposing a 10% tariff on all products imported into the U.S., which he says would protect American jobs and raise revenue to offset extending his 2017 tax cuts. Although Goldman is skeptical of the 10% increase, analysts expect him to "quickly" put new tariffs on imports from China and autos; tariffs on Chinese electric vehicles are scheduled to be raised to 100%, thanks to a directive from President Joe Biden building on Trump's own prior tariffs.

"He's proposed 50%, or sometimes even more, tariffs on China, and Americans, particularly lower- and middle-income Americans, depend on access to Chinese goods," Nobel Prize-winning economist Joseph Stiglitz told Quartz last month, adding that "those tariffs would create a significant increase in the cost of living, it would be a shock to the economy, and that inflation, in turn, would lead the Fed to raise interest rates."

Trump's economic proposals would also increase the federal deficit by $5.8 trillion over the next decade, almost five times more than Harris's proposals, which would add $1.2 trillion, according to recent studies from The University of Pennsylvania's Penn Wharton Budget Model.