Interview, Fireside Chat
What investors expect from Trump
- Goldman Sachs surveys over 500 macroeconomically significant issues, including immigration, trade, and fiscal policy, to determine investor assumptions underlying market pricing.
- Investors identify universal 10% to 20% tariffs, fiscal sustainability risks triggered by specific moves, and unauthorized deportations as primary negative macroeconomic concerns for 2025.
- Under a second Trump administration, Goldman Sachs assumes net immigration will average 750,000 annually, driven entirely by authorized immigration as unauthorized immigration trends toward net zero.
- Most investors project net immigration will average between 500,000 and 1 million annually, though 6% expect net immigration to turn negative.
- While nearly all respondents expect the 2017 tax cuts to be extended, two-thirds anticipate a full expansion and one-third expect a partial extension.
- Goldman Sachs estimates additional tax cuts at approximately 0.2% of GDP or $60 billion, with corporate tax rates unlikely to reach 15% but possibly reduced to 20%.
- Manufacturing tax rates are assessed as likely to fall to 50%, whereas the corporate tax rate is not expected to reach the 15% threshold.
- The federal primary deficit is currently 5% of GDP, and the debt-to-GDP ratio is projected to approach a new all-time high.
- Interest rates are expected to be double the levels assumed during the previous Trump administration, potentially constraining Congress from enacting further unfunded tax cuts or spending increases.
- A new government efficiency department is viewed by 45% of respondents as yielding insignificant spending cuts, while smaller shares anticipate savings ranging from $25 billion to over $300 billion.
- Significant spending cuts are deemed unlikely without reductions in defense and entitlement spending, despite the political risk to Republicans regarding unfulfilled campaign proposals.
- Net policy impacts on GDP are expected to offset over a two to three-year horizon, with negative effects from labor reductions and tariffs occurring in 2025 and positive effects from tax cuts in 2026.
- On a multi-year basis, policy changes are not expected to substantially alter the U.S. economic growth trajectory.
- Baseline tariff policies are projected to raise the effective U.S. tariff rate by three to four percentage points, potentially increasing inflation to the mid-twenties range.
- A universal tariff scenario is estimated to raise the price level by approximately 1% and push peak inflation slightly above 3%, representing an impact triple that of other tariff policies combined.
- The Federal Reserve is expected to cut rates in December with additional consecutive cuts in Q1, though the pace of cutting may slow earlier than current forecasts indicate.
- Market pricing is viewed as too hawkish relative to Goldman Sachs' dovish outlook, which anticipates risks of a downside episode comparable to 2019 insurance cuts if economic conditions deteriorate.