A democratic chamber prevents Trump agenda that kills the economy.

A Democratic White House would block tariffs, while Senate Republicans could blunt tax increases

Polls indicate that the U.S. general election in November will be close, with Democrats and Republicans both in a position to win full control of both the White House and Congress.

Yet the policy differences between the two parties are stark, and the greatest impacts of their potential policy changes will be felt by the U.S. consumer and the corporations that sell to them, according to Raymond James's Washington policy analyst Ed Mills.

"The election outcome will be closely watched across all sectors, but with tax cuts, tariffs, trade wars, immigration fights and Fed rate decisions looming large over the 2025 agenda, the outcome of the 2024 election will be key to understanding the impact on the consumer," Mills wrote in a Tuesday client report.

Mills predicts there's a 50% chance that Donald Trump and the Republican Party will take full control of the White House and Congress, and a 20% chance of a Democratic sweep, but that split government would be generally preferable for companies catering to the American consumer.

"The best scenario for the consumer sector would be a Democratic presidency and a split Congress, as greater certainty emerges on trade given a lack of trade wars against China or Mexico," Mills wrote.

He argued that a Republican sweep would be a negative for consumer stocks, given Donald Trump's threats to impose an across-the-board 10% tariff on all imported products and a 60% tariff on the more than $500 billion in products Americans import from China each year.

Investors should also be on the lookout for a resurgence of inflation under such a scenario given the GOP's "push for higher tariffs, stricter immigration policy, continued fiscal spending, and an extension of the 2017 tax cuts," that would blow out the deficit while simultaneously shrinking the U.S. labor market, he added.

A Democratic sweep would increase the chances of higher taxes for both corporations and wealthy consumers, which would reduce corporate profits broadly but hit companies that cater to richer Americans most acutely.