Risk to the US economy may increase if Trump wins the US presidential election on November 5, 2024 (Current Issue No.3532 Full Ed.)

• The US presidential election on November 5, 2024 will be a key factor in setting the US policy direction over the next four years. Regardless of which party wins, both are likely to continue trade protectionism towards China, albeit to varying degrees. The US fiscal deficit will likely increase in line with differing approaches in their fiscal spending and tax policies.
• If the Republican Party, led by Donald Trump, wins the election and secures a majority in both the Senate and the House (Republican Sweep), the US may face the risk of prolonged stagflation as a result of several measures, including import tariff hikes, restrictions towards immigrant labor, and reductions in corporate and household income taxes. These policies are expected to result in an increased fiscal deficit, while the US dollar is likely to strengthen in the short term.
• If the Democratic Party, led by Kamala Harris, wins the election and secures a majority in both the Senate and the House (Democratic Sweep), the US economy is likely to slow down in line with the economic cycle. Inflation risk is expected to remain manageable, and the fiscal deficit is likely to be lower than in the first scenario.
• If neither party secures a majority in both houses (Split Congress or divided government), the risk of stagflation may persist if Donald Trump is president. The impacts on the US economy in 2025 remain to be seen as various policies, especially fiscal policies, may take time to pass through Congress.