Investing.com -- The U.S. election race has taken a dramatic turn as President Joe Biden bowed out, and pass the baton to Vice President Kamala Harris, but former President Donald Trump's expected policies are likely to be more inflationary should he, as polls suggest, get another crack at the White House.
"Trump 2.0 will be a more inflationary policy regime, given restricted immigration, higher tariffs, and the extension of the Tax Cut and Jobs Act of 2025," Macquarie said in Monday note, forecasting U.S. Treasury yields and the dollar to be higher.
In previous commentary prior to Biden dropping out, Macquarie said that Trump's policies would likely be more inflationary the Biden's, and with Harris expected to win the Democratic nominee for President, the latter's policy are unlikely to diverge from Biden's.
Goldman Sachs agrees, saying in late Sunday note that it doesn't "expect the Democrats’ fiscal and trade policy agenda to shift meaningfully in the event that Harris is the nominee."
Trump's likely tougher stance on immigration, more aggressive trade tariffs and potential tax cuts have all the ingredients to stoke inflation, particularly in the labor market. The Trump regime may restrict immigration may seek to remove undocumented immigrants, Macquarie argued previously, potentially cutting 1 million workers out of the work-force. The likely fallout from the removal of low-cost labor supply may put upward pressure on wages.
The federal deficit, meanwhile, is also likely to expand under Trump as the former president is likely to extend the Tax Cut and Jobs Act of 2017 beyond its sunset period of 2025.
Beyond Trump's expected policies, Macquarie acknowledges "other structural drivers of inflation - including de-globalization, de-carbonization, climate change, the demographic transition, and global conflict - may also play a role beyond 2024 in keeping global inflation high."
The Biden-Harris switch, Macquarie adds, has introduced "more political certainty," as the change is "unlikely to result in a clearly better net showing for the Democrats vs. Donald Trump in November."
Since the announcement, Harris has received several endorsements to be the Democratic presidential nominee from Democratic leaders including former House Speaker Nancy Pelosi.