Harris vs. Trump: How the 2024 Election Could Transform the U.S. Dollar and Global Trade

How the 2024 U.S. Election Could Impact the U.S. Dollar: Harris vs. Trump

As the 2024 U.S. presidential election approaches, investors are closely examining how either Kamala Harris or Donald Trump could influence the U.S. dollar through their different economic and trade policies. Their opposing approaches to fiscal policy, trade, and immigration could substantially affect the dollar’s performance in both the short and long term, creating distinct outcomes for currency markets and international trade.

Trade Policy

Harris is expected to promote trade stability with fewer policy changes, potentially reducing inflationary pressures and supporting a weaker dollar relative to currencies like the euro. Her approach would likely emphasize predictable trade relationships and diplomatic solutions to trade disputes.

In contrast, Trump may reinstate or escalate tariffs, particularly targeting Chinese goods, which could initially strengthen the dollar but risk long-term weakness due to slower economic growth and reduced international trade.

Tax Policy

Harris’s fiscal conservatism would likely avoid large tax cuts, focusing instead on economic stability and deficit management. This approach could result in mild downward pressure on the dollar but promote long-term economic health.

Trump may expand the 2017 tax cuts, potentially boosting short-term spending and economic growth but raising the federal deficit, which could weaken the dollar over time as investors question the sustainability of U.S. fiscal policies.

Inflation and Federal Reserve Response

Harris’s conservative fiscal approach may keep inflation low, reducing the need for aggressive Fed rate hikes and potentially weakening the dollar against other currencies. This stability-focused strategy could make U.S. assets less attractive to yield-seeking investors.

Under Trump, tariffs and tax cuts could drive up inflation, prompting Fed rate hikes that could strengthen the dollar short-term but risk long-term stability if inflation rises too quickly, potentially deterring foreign investment.

Immigration and Labor Market

Harris would likely support a balanced immigration approach, helping stabilize wages and maintain workforce productivity through steady labor market growth. This could contribute to sustainable economic expansion without excessive wage inflation.

Trump’s planned immigration restrictions could tighten the labor market, raising wages and inflation, potentially supporting the dollar initially but risking longer-term weakness due to reduced labor supply and limits on economic growth.

Conclusion

The candidates’ opposing approaches present distinct possibilities for the dollar’s future.

Harris’s emphasis on fiscal restraint and balanced trade suggests a more stable but potentially weaker dollar, especially against the euro and Asian currencies. Her policies prioritize long-term economic stability over short-term growth.

Trump’s policies might initially strengthen the dollar through inflationary measures and higher interest rates, but carry longer-term risks related to deficits and economic uncertainty. As the election unfolds, investors will need to monitor policy changes that could alter the dollar’s global position and influence international trade patterns.