Forecasting America’s Economic Future Under Harris vs. Trump

Every election is a fork in the road. On the stump across America, Donald Trump and Kamala Harris offer strikingly different visions of the economy they’d seek to build after winning the presidency in November.

On Planet Trump, US tariff barriers are higher — and corporate tax rates lower — than they’ve been in decades, while oil drillers roam the land and illegal immigrants are shipped out.

In Harrisworld, parents and homebuyers have access to new pots of public cash, grocers have to think twice before jacking up food prices, and companies get dinged if they funnel profits to shareholders via buybacks.

Campaign-trail pitches cast light on the direction of travel. Fully implemented, Trump’s tariff plan would essentially end US-China trade, according to analysis by Bloomberg Economics, while his proposed border crackdown and deportations could knock more than 3% off GDP by the 2028 election. Harris’ proposals are more modest, but show a new willingness for the government to wade into markets, from real estate to retail.

Of course, campaign pledges often fall by the wayside, get overtaken by events or are stymied by a hostile Congress. Forecast models also have their limitations. Trump, with a narrow poll lead in battleground states on who’s more trusted to manage the economy, can point to robust growth in his first term before the pandemic intervened. Harris is touting the rapid post-Covid rebound presided over by the Biden administration.

One thing seems clear: Under both leaders US debt — already set to reach 99% of GDP this year — will continue to rise. Bloomberg Economics estimates that Trump’s tax cuts could take it to 116% in 2028, and even under Harris’ more conservative proposals it would stay on a path to 109%.

Economics aren’t the only factor that will determine the election outcome, but they’re an important factor. Following is an overview of what the two candidates are promising in key policy areas like tax, housing and immigration, and what it all means for the outlook.

The centerpiece of Trump’s 2024 agenda is an extension of the law passed in his first term that lowered business and individual tax rates, and is due to expire in 2025. Republicans say that’s priority no. 1 if they win both the White House and Congress. There’d likely be bipartisan support for extending some of the cuts — especially for middle-class households and small businesses — even if they don’t.

Trump also wants to lower the corporate rate even further, to 15% from 21%. As the campaign unfolds he’s promised more and more tax breaks — from exempting tips and overtime pay, to reversing a cap on state-and-local deductions that he himself imposed — leaving aides struggling to keep count.

Harris says she’ll raise the small business tax deduction for startup costs tenfold, to $50,000. She’ll also boost the child tax credit to as much as $3,600 per eligible child — from the current $2,000 — and add a new $6,000 credit for newborns.

Since Trump’s running mate JD Vance has backed a version of the child credit, it’s another area where the two parties could cut a deal, says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, which advocates for fiscal restraint.

MacGuineas says she can’t recall watching an election campaign that’s featured so many competing giveaways. “This is the Oprah tax environment: ‘You get a tax break, you get a tax break, and you get a tax break,’” she says.

The GOP campaign says cuts in wasteful spending, ramped-up energy production and higher tariff revenue will help pay for the tax cuts. Harris has outlined some more concrete revenue-raising plans: Increase the corporate tax rate to 28%, and lift the tax on capital gains to 28% for people earning $1 million or more. Congress-watchers reckon the former is doable in the event of a Democratic sweep, while the latter would be a big ask even then. Harris has also floated a minimum income tax on billionaires and a 4% levy on stock buybacks, four times the current level.

Trump ushered in a new era of US trade policy with his first-term tariffs. He’s promising to double down on this key element of “America First” if he wins again.

The former president has touted baseline 20% tariffs on all imports, and as much as 60% if they come from China. He’s threatened giant new tariffs on cars from Mexico; farm machinery made by John Deere & Co. (if it ships jobs abroad); and any country that abandons the US dollar.

Trump has also promised to revoke China’s Most Favored Nation status, and prevent Chinese investors from buying real estate or companies in the US. Both candidates have committed to the cause of keeping United States Steel Corp. in American ownership, by blocking a proposed Japanese takeover.

Harris hasn’t signaled any major departure from the trade policies of the Biden administration, which retained most of Trump’s first-term tariffs and added some new ones. She’s warned that Trump’s new plan for across-the-board duties would raise costs for consumers, and labeled it a “national sales tax.” Harris has also promised tax credits for US businesses to help them compete with China.

Immigration has been among the top voter concerns after a record surge in illegal border crossings under Biden. The number exceeded 300,000 in December, though it’s fallen sharply after asylum restrictions were rolled out in June.

Trump says he’ll deport millions of undocumented migrants, and complete the border wall he embarked on last term. The GOP platform includes a pledge to end “a tidal wave of illegal Aliens, deadly drugs, and Migrant Crime.”

After being given a mandate as vice president to tackle immigration, Harris has come under scrutiny for her role in the border surge. Since becoming the Democratic candidate, she hasn’t offered much detail on immigration policy, though she’s pledged to re-introduce legislation clamping down on border crossings.

Even in a divided government, “it’s much more likely than it was a year or two ago that you would see a deal that is border-security focused,” says Brendan Steinhauser, a Republican strategist who spent two decades working on Capitol Hill. “Democrats have shifted on that.”

Harris wants to give first-time buyers a big helping hand, with support worth up to $25,000 for down payments. She’s also proposing a $40 billion fund to back innovations in homebuilding, and a new tax incentive for builders who work on starter homes.

To aid renters, she’s proposed new measures that target landlords who use price-setting tools to raise rents, and suggested removing tax benefits for investors who buy swaths of single-family homes — an effort to shield renters from markups.

Trump, like Harris, has proposed repurposing some federal land to build homes, and he’s promised to cut the cost of homebuilding by slashing red tape. His campaign says the former president’s proposals to curb illegal immigration would also help ease housing prices.

Prices shot up on Biden’s watch, and Trump is trying to ensure Harris shares the blame — though economists say some of his own policies, like tariffs and tax cuts, could make matters worse.

Energy is a key part of Trump’s low-inflation promise. He argues that boosting oil and gas production — by opening up new land for drilling, offering tax relief for oil and gas producers, and speeding up the approval of permits and pipelines — would help bring costs down. Those measures would be tough to get through Congress unless there’s a GOP sweep, says Republican strategist Steinhauser.

Much of Harris’ agenda is structured around lowering costs for middle-class families. Her proposed federal ban on price gouging for groceries, including new penalties for corporations that violate pricing rules, has been greeted skeptically by economists.

To bring down health care expenses, Harris has proposed a $2,000 annual cap on out-of-pocket costs for prescription drugs, and a $35 per month limit on insulin payments.

Pandemic inflation was so painful for Americans that “whoever wins will attempt to make, whether it’s drugs or through different forms of tax credits, some kind of increase in affordability for the middle and lower class,” says MacGuineas.

In the long run, economic eras are defined by what the two US parties end up agreeing on, rather than what they fight over.

Republican presidents like Dwight Eisenhower and Richard Nixon bought into the New Deal framework of high taxes and an interventionist state, ensuring it endured for almost half a century. Democrats Bill Clinton and Barack Obama signed on to swaths of the free-trade-and-deregulate agenda pioneered by the GOP in the 1980s — which also held sway in Washington for decades, but lately has taken a series of hits, from financial crisis, trade wars, climate change, a global pandemic, and mounting great-power conflict. There’s not much left of it now, and any new playbook for US economic policy remains a work in progress.

So it’s worth noting what Planet Trump and Harrisworld have in common, even though they’re very different places. In both, US governments are comfortable with warning off foreign firms from takeovers of American businesses, deploying tariffs as a policy tool — and running budget deficits far bigger than the historical norm, even when the economy is doing fine.

For voters in a deeply divided US, it's the differences between the candidates that loom largest. For the rest of the world, it might be the broad alignment on economic nationalism that matters more.

—With assistance from Jarrell Dillard, Enda Curran, Akayla Gardner, Stephanie Lai, Bhargavi Sakthivel, Maeva Cousin, Eleonora Mavroeidi, Chris G Collins, Stuart Paul, Anna Wong and Estelle Ou