The US presidential election on November 5, 2024 will be a key factor in setting the US policy direction over the next four years, which will affect the US and global economic outlook. 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. The new US president will face fiscal challenges from high levels of public debt, fiscal deficits, and interest payments, coupled with a potential slowdown in the US economy. Additionally, the passage of various bills, especially those related to fiscal policy, will still depend on a majority vote in Congress. The election result prediction can be divided into 3 scenarios, each of which will affect the outlook of the economy, inflation and currency, and fiscal status to varying degrees, as follows: 1. Scenario 1: 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 due to several measures, including import tariff hikes, restrictions on 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.
2. Scenario 2: 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. The inflation risk is expected to remain manageable, and the fiscal deficit is likely to be lower than in Scenario 1.
3. Scenario 3: If neither party secures a majority in both houses (a 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.
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