from ZeroHedge:
Update (Wednesday 0643ET):
Goldman’s chief economist Jan Hatzius provided clients, shortly after the official call by AP on a Trump win, the six main points of what this means in the political game in Washington, the economy, and markets:
- Media outlets have called the presidential election for Donald Trump, who looks likely to win 312 electoral votes. In the Senate, two Democratic-held seats (Ohio and West Virginia) have flipped to Republicans, giving Republicans the majority. The Republican candidate for the Democratic-held Montana seat holds a wide lead but with little vote reported so far, and Republican candidates lead narrowly in four additional Democratic-held seats (Michigan, Nevada, Pennsylvania, and Wisconsin). This likely gives Republicans at least 52 seats in the Senate, with a potential of 56 seats if margins in uncalled races hold.
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- In the House, the outlook is still unclear but leans Republican. Thus far, media outlets have called two seats that have flipped, one Democratic-held and one Republican-held. A number of additional competitive seats have very narrow margins but have not yet been called. As the partial results stood at 2am ET on Nov. 6, the House margin looks likely to be very similar to the current 221R-214D composition (excluding vacancies), with the potential for small Democratic net gains but potentially not quite enough to take the majority. Prediction markets currently put the odds of a Republican sweep at around 90%. With many potentially decisive races in California where the vote could take several days to count, the House outcome might not become entirely clear until later this week or, possibly, next week.
- If Republicans win a narrow majority in the House, this would allow for full extension of the 2017 tax cuts that expire at the end of 2025, likely including reinstatement of some expired business investment incentives. We expect that congressional Republicans would support modest additional tax cuts to accommodate some of Trump’s campaign proposals, but expect these proposals would be scaled down and would cut taxes by a few tenths of a percent of GDP, primarily focused on individual income taxes (not corporate). In a Republican sweep, we would also expect federal spending growth to rise somewhat, particularly on defense. While a larger Senate margin (e.g. 55 or 56 seats) could result in greater Republican support for spending cuts in other parts of the budget (i.e., “mandatory” spending on benefit programs), the thin margin in the House might nevertheless pose an obstacle to such plans. By contrast, in the less likely scenario that Democrats win a very slim House majority, we would expect somewhat greater fiscal restraint as the modest net tax cuts we expect under a Republican sweep would be unlikely, and some of the upper-income tax cuts would be more likely to expire at the end of 2025.
- On tariffs, we would expect Trump to impose tariffs on imports from China that average an additional 20pp. While the 10-20% across-the-board tariff that Trump has proposed is not our base case, we believe it is very possible (40% chance) that such a tariff will be implemented. We expect auto tariffs to come into focus and we assume tariffs on auto imports from the EU, though this could be applied more broadly. We estimate that this combination of tariff policies would provide a one-time boost to core PCE inflation that peaks at 30-40bp and a modest drag on GDP.
- On immigration, we expect an incoming Trump administration will reduce immigration to around 750k/year, slightly below the 1mn pre-pandemic trend. In the event that Democrats manage to win a narrow House majority, we would expect immigration to decline less, to a pace around 1.25mn/yr. The difference arises from the greater enforcement funding a Republican-controlled Congress would likely approve that would be unlikely in a divided government scenario.
- On regulation, an incoming Trump administration would likely take a lighter-touch approach, particularly with regard to energy, financial, and labor policies. By contrast, while some aspects of antitrust policy might ease slightly, we would expect scrutiny of the tech sector to continue.
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Update (Wednesday 0620ET):
Trump was elected the 47th president by the American people.
