Connect with us

Economics

Why Kamala Harris’s chances of victory just jumped

Published

on

The Economist’s statistical model of America’s presidential election will be updated six more times before votes are counted. There are few opportunities for candidates to move the dial in an election which has been stubbornly close since Kamala Harris became the Democratic nominee. Today’s update will cheer her supporters: the vice-president’s probability of victory rose by six percentage points, making the race a dead heat.

There are three reasons. One is the volume of new polls—65 were added to our forecast today—giving the model more confidence about small changes. Another is that there is so little time left before the election. Up until now our model has been a forecast, with weeks or months left for candidates to make gains. Many pollsters are now publishing their final surveys of the cycle, so the forecast will soon become a “now-cast”.

Chart: The Economist

The third is that the race is remarkably close, which means that even tiny changes in expected vote shares can yield large shifts in win probabilities. The most influential polls yesterday were concentrated in four states: Michigan, North Carolina, Pennsylvania and Wisconsin. In those states, Ms Harris’s forecasted vote share rose by an average of 0.4 percentage points (see chart)—a small move that was nonetheless sufficient to increase her chance of victory by an average of six percentage points across the four.

On the surface, the new polls did not look unusually good for Ms Harris. Most showed results that were close to a tie. However, the firms that released surveys yesterday—particularly AtlasIntel, Quantus and Trafalgar—have tended to give Donald Trump better numbers this year than have other pollsters who surveyed the same races at similar times. Our model shifts all poll results to counteract such biases. And on average, these adjustments nudged vote margins in yesterday’s swing-state polls around half a percentage point in Ms Harris’s direction.

Chart: The Economist

Moreover, in recent days the model has been moving towards Mr Trump, and Ms Harris’s average projected vote share (excluding third parties) had fallen below 50% in every swing state besides Michigan. As a result, new polls showing a tied race (like those in Pennsylvania did on average after our adjustments) or even a slim lead for Mr Trump (as did those in North Carolina) still represented an improvement for Ms Harris, compared with the model’s relatively gloomy expectations for her yesterday.

New polls also came out in Arizona and Georgia yesterday with a wide spread of results, ranging from an eight-point lead for Mr Trump to a one-point edge for Ms Harris. However, after our adjustments, the average of these new surveys landed very close to the model’s previous expectation of a two-point lead for Mr Trump in both states. As a result, the forecasts for Arizona and Georgia were unchanged.

Ms Harris’s small gains have brought her back to parity in Nevada, Pennsylvania and Wisconsin and made her a narrow favourite in Michigan, whereas Mr Trump retains a small but clear edge in Arizona, Georgia and North Carolina. The two candidates each won exactly half of our model’s simulations in its latest run. On average, they both wind up with 269 electoral votes—which would leave the House of Representatives to break the tie, presumably in Mr Trump’s favour. However, the model assigns just a 1% chance to an actual electoral-college tie, which would probably require Ms Harris to win Michigan, Pennsylvania and Wisconsin while losing Nebraska’s second Congressional district.

The direction or size of polling errors cannot be predicted. But if history is any guide, surveys are likely to underestimate one candidate by a margin that dwarfs the small day-to-day shifts in our model’s average estimates. Any such error would probably deliver a decisive victory to whichever candidate it benefits. Despite the tight polls, our forecast gives a two-in-five chance of the winning candidate receiving more electoral votes than Joe Biden did in 2020 or Mr Trump did in 2016.

The other main source of uncertainty in our model, aside from polling errors, is the time remaining until the election. The forecast works by estimating the candidates’ current positions with the available data, and then simulating movement that could occur each day until November 5th. With just six remaining, there is little movement left to make.

The effect on our forecasted probabilities is counterintuitive. There are few opportunities for big changes in public opinion, meaning polls published now have greater weight. As a result, the forecasted probabilities may change more substantially from day to day than they would earlier in the cycle. The slight movement in Ms Harris’s favour today is harder to reverse in the next six days than it would have been a month ago.

The polls in today’s forecast update were mostly based on interviews conducted a few days ago, so it is hard to judge what, if anything, caused a small uptick in Ms Harris’s standing. Some polls now being published were conducted after Mr Trump’s rally at Madison Square Garden on October 27th—which is now roundly considered to have been a misstep for his campaign—but it is unlikely to be until after the election that we have a clear idea of whether that event moved many voters. It appears as though the final six days of the campaign will go in a similar fashion to the past three months: plenty to talk about, but no decisive leader.

Economics

Trump tariffs’ effect on consumer prices debated by economists

Published

on

The U.S. government is set to increase tariff rates on several categories of imported products. Some economists tracking these trade proposals say the higher tariff rates could lead to higher consumer prices.

One model constructed by the Federal Reserve Bank of Boston suggests that in an “extreme” scenario, heightened taxes on U.S. imports could result in a 1.4 percentage point to 2.2 percentage point increase to core inflation. This scenario assumes 60% tariff rates on Chinese imports and 10% tariff rates on imports from all other countries.

The researchers note that many other tariff proposals have surfaced since they published their findings in February 2025. 

Price increases could come across many categories, including new housing and automobiles, alongside consumer services such as nursing, public transportation and finance. 

“People might think, ‘Oh, tariffs can only affect the goods that I buy. It can’t affect the services,'” said Hillary Stein, an economist at the Boston Fed. “Those hospitals are buying inputs that might be, for example, … medical equipment that comes from abroad.” 

White House economists say tariffs will not meaningfully contribute to inflation. In a statement to CNBC, Stephen Miran, chair of the Council of Economic Advisers, said that “as the world’s largest source of consumer demand, the U.S. holds all the leverage, which means foreign suppliers will have to eat the economic burden or ‘incidence’ of the tariffs.” 

Assessing the impact of the administration’s full economic agenda has been a challenge for central bank leaders. The Federal Open Market Committee decided to leave its target for the federal funds rate unchanged at the meeting in March. 

The Fed targets its overnight borrowing rate at between 4.25% and 4.5%, with the effective federal funds rate at 4.33% on March 31, according to the New York Fed. The core personal consumption expenditures price index inflation rate rose to 2.8% in February, according to the Commerce Department. Forecasts of U.S. gross domestic product suggest that the economy will continue to grow at a 1.7% rate in 2025, albeit at a slower pace than what was forecast in January.  

Consumers in the U.S. and businesses around the world are bracing for impact. 
 
“There is a reason why companies went outside of the U.S.,” said Gregor Hirt, chief investment officer at Allianz Global Investors. “Most of the time it was because it was cheaper and more productive.” 

Watch the video above to learn how much inflation tariffs may cause.

Continue Reading

Economics

Trump’s tariff gambit will raise the stakes for an economy already looking fragile

Published

on

U.S. President Donald Trump speaks alongside entertainer Kid Rock before signing an executive order in the Oval Office of the White House on March 31, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

President Donald Trump is set Wednesday to begin the biggest gamble of his nascent second term, wagering that broad-based tariffs on imports will jumpstart a new era for the U.S. economy.

The stakes couldn’t be higher.

As the president prepares his “liberation day” announcement, household sentiment is at multi-year lows. Consumers worry that the duties will spark another round of painful inflation, and investors are fretting that higher prices will mean lower profits and a tougher slog for the battered stock market.

What Trump is promising is a new economy not dependent on deficit spending, where Canada, Mexico, China and Europe no longer take advantage of the U.S. consumer’s desire for ever-cheaper products.

The big problem right now is no one outside the administration knows quite how those goals will be achieved, and what will be the price to pay.

“People always want everything to be done immediately and have to know exactly what’s going on,” said Joseph LaVorgna, who served as a senior economic advisor during Trump’s first term in office. “Negotiations themselves don’t work that way. Good things take time.”

For his part, LaVorgna, who is now chief economist at SMBC Nikko Securities, is optimistic Trump can pull it off, but understands why markets are rattled by the uncertainty of it all.

“This is a negotiation, and it needs to be judged in the fullness of time,” he said. “Eventually we’re going to get some details and some clarity, and to me, everything will fit together. But right now, we’re at that point where it’s just too soon to know exactly what the implementation is likely to look like.”

Here’s what we do know: The White House intends to implement “reciprocal” tariffs against its trading partners. In other words, the U.S. is going to match what other countries charge to import American goods into their countries. Most recently, a figure of 20% blanket tariffs has been bandied around, though LaVorgna said he expects the number to be around 10%, but something like 60% for China.

What is likely to emerge, though, will be far more nuanced as Trump seeks to reduce a record $131.4 billion U.S. trade deficit. Trump professes his ability to make deals, and the saber-rattling of draconian levies on other countries is all part of the strategy to get the best arrangement possible where more goods are manufactured domestically, boosting American jobs and providing a fairer landscape for trade.

The consequences, though, could be rough in the near term.

Potential inflation impact

On their surface, tariffs are a tax on imports and, theoretically, are inflationary. In practice, though, it doesn’t always work that way.

During his first term, Trump imposed heavy tariffs with nary a sign of longer-term inflation outside of isolated price increases. That’s how Federal Reserve economists generally view tariffs — a one-time “transitory” blip but rarely a generator of fundamental inflation.

This time, though, could be different as Trump attempts something on a scale not seen since the disastrous Smoot-Hawley tariffs in 1930 that kicked off a global trade war and would be the worst-case scenario of the president’s ambitions.

“This could be a major rewiring of the domestic economy and of the global economy, a la Thatcher, a la Reagan, where you get a more enabled private sector, streamlined government, a fair trading system,” Mohamed El-Erian, the Allianz chief economic advisor, said Tuesday on CNBC. “Alternatively, if we get tit-for-tat tariffs, we slip into stagflation, and that stagflation becomes well anchored, and that becomes problematic.”

Tariffs could be a major rewiring of the domestic and global economy, says Mohamed El-Erian

The U.S. economy already is showing signs of a stagflationary impulse, perhaps not along the lines of the 1970s and early ’80s but nevertheless one where growth is slowing and inflation is proving stickier than expected.

Goldman Sachs has lowered its projection for economic growth this year to barely positive. The firm is citing the “the sharp recent deterioration in household and business confidence” and second-order impacts of tariffs as administration officials are willing to trade lower growth in the near term for their longer-term trade goals.

Federal Reserve officials last month indicated an expectation of 1.7% gross domestic product growth this year; using the same metric, Goldman projects GDP to rise at just a 1% rate.

In addition, Goldman raised its recession risk to 35% this year, though it sees growth holding positive in the most-likely scenario.

Broader economic questions

However, Luke Tilley, chief economist at Wilmington Trust, thinks the recession risk is even higher at 40%, and not just because of tariff impacts.

“We were already on the pessimistic side of the spectrum,” he said. “A lot of that is coming from the fact that we didn’t think the consumer was strong enough heading into the year, and we see growth slowing because of the tariffs.”

Tilley also sees the labor market weakening as companies hold off on hiring as well as other decisions such as capital expenditure-type investments in their businesses.

That view on business hesitation was backed up Tuesday in an Institute for Supply Management survey in which respondents cited the uncertain climate as an obstacle to growth.

“Customers are pausing on new orders as a result of uncertainty regarding tariffs,” said a manager in the transportation equipment industry. “There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business.”

While Tilley thinks the concern over tariffs causing long-term inflation is misplaced — Smoot-Hawley, for instance, actually ended up being deflationary — he does see them as a danger to an already-fragile consumer and economy as they could tend to weaken activity further.

“We think of the tariffs as just being such a weight on growth. It would drive up prices in the initial couple [inflation] readings, but it would create so much economic weakness that they would end up being net deflationary,” he said. “They’re a tax hike, they’re contractionary, they’re going to weigh on the economy.”

Get Your Ticket to Pro LIVE

Join us at the New York Stock Exchange!
Uncertain markets? Gain an edge with 
CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange.

In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.

Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!

Continue Reading

Economics

Euro zone inflation, March 2025

Published

on

A man pushes his shopping cart filled with food shopping and walks in front of an aisle of canned vegetables with “Down price” labels in an Auchan supermarket in Guilherand Granges, France, March 8, 2025.

Nicolas Guyonnet | Afp | Getty Images

Annual Euro zone inflation dipped as expected to 2.2% in March, according to flash data from statistics agency Eurostat published Tuesday.

The Tuesday print sits just below the 2.3% final reading of February.

So called core-inflation, which excludes more volatile food, energy, alcohol and tobacco prices, edged lower to 2.4% in March from 2.6% in February. The closely watched services inflation print, which had long been sticky around the 4% mark, also fell to 3.4% in March from 3.7% in the preceding month.

Recent preliminary data had showed that March inflation came in lower than forecast in several major euro zone economies. Last month’s inflation hit 2.3% in Germany and fell to 2.2% in Spain, while staying unchanged at 0.9% in France.

The figures, which are harmonized across the euro area for comparability, boosted expectations for a further 25-basis-point interest rate cut from the European Central Bank during its upcoming meeting on April 17. Markets were pricing in an around 76% chance of such a reduction ahead of the release of the euro zone inflation data on Tuesday, according to LSEG data.

The European Union is set to be slapped with tariffs due in effect later this week from the U.S. administration of Donald Trump — including a 25% levy on imported cars.

While the exact impact of the tariffs and retaliatory measures remains uncertain, many economists have warned for months that their effect could be inflationary.

This is a breaking news story, please check back for updates.

Continue Reading

Trending