Adopting the Limited Trump Scenario as the new baseline

Following the outcome of the US elections, we have adopted our ‘limited Trump’ scenario as our new baseline forecast. Our new baseline assumes a Republican-led Congress extends the personal tax cuts under the 2017 tax law and enacts higher spending levels.

What you will learn:

• We also assume that President-elect Donald Trump will use his presidential powers to reduce immigration and impose targeted tariffs on China, Mexico, Canada, and the European Union.
• The outlook for 2025 doesn’t change appreciably because it will take time for changes in fiscal, trade, and immigration policy to be implemented and impact the economy. Our new forecast anticipates real GDP growth will be 0.3ppts higher in 2026 than under a continuation of the previous political balance.
• However, as the fiscal support fades and the drag from immigration cuts intensifies, the deviation from the continuation of the current balance narrows before falling 0.6ppts lower in 2028.
• It’s important to expect the unexpected, particularly when it comes to tariffs. Therefore, we will develop several tariff scenarios based on our new baseline. These scenarios will focus on both the magnitude of the tariffs implemented and the timing.
• We will continue to update our ‘full-blown Trump’ scenario as this remains a possibility if specific guideposts are met.

For more insights on the 2024 US Presidential Election, click here.