The unexpected replacement of the Democratic presidential candidate less than four months before the U.S. election has introduced significant uncertainty regarding economic policy for 2025 and beyond. The immediate question is whether Vice President Kamala Harris, President Joe Biden's expected successor, will recalibrate the Democrats' economic agenda. Economists and investors are closely examining her record as a U.S. senator and California's attorney general for insights.

Previously, many market participants assumed former President Donald Trump was the clear favorite for the November election. However, enthusiasm for Harris has led analysts to reconsider the odds. Economists at Wells Fargo & Co. noted "tremendous uncertainty" about the future, while Gavekal Research called the U.S. political situation "sensationally unpredictable." Clay Lowery, a former senior Treasury official, highlighted the unprecedented scale of recent events, adding uncertainty to the election outlook and potentially harming investor confidence.

Trump's agenda includes lower taxes, higher tariffs, and a strict crackdown on immigration, which many economists view as inflationary. Harris, on the other hand, has yet to detail her proposals. Economists expect her to broadly adhere to the Biden administration's current policies, which focus on major subsidies for green energy, addressing high living costs, and maintaining tax relief for lower- and middle-income families. However, she is likely to signal her own policies on individual income tax rates, climate, and consumer protection.

Harris's record suggests a more protectionist approach to trade than the Obama or Clinton administrations. This aligns more with Biden's stance, which has maintained Trump's tariffs on China. In 2016, Harris opposed the Trans-Pacific Partnership, prioritizing the interests of workers over expanding trade opportunities.

Harris has garnered union endorsements since announcing her candidacy, highlighting the economic benefits unions bring to both union and non-union workers. On climate, she proposed a $10 trillion package to reduce greenhouse gas emissions during her 2019 presidential bid and supported the Green New Deal in Congress, which goes beyond Biden's climate policies.

As California attorney general, Harris pursued a consumer protection agenda, and economists expect her administration to continue this, potentially introducing more consumer-related regulations. Bloomberg Intelligence analysts anticipate ongoing subsidies for the green industry and increased scrutiny of big tech. Ben Harris at Brookings believes Harris could make her mark by expanding child-tax credits and increasing support for childcare and eldercare, areas where the outgoing administration fell short.

Elizabeth Pancotti of the Roosevelt Institute noted the stark differences between Harris's and Trump's policy proposals, which heighten the focus on the race. Initial polling suggests the race may have tightened, increasing uncertainty about the election's outcome. Anatole Kaletsky, chief economist at Gavekal, warned that this increased competition could cast a shadow over the global economy, given the U.S.'s significant geopolitical and financial influence.

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