Former President Donald Trump is campaigning on a pledge to end the “inflation nightmare,” vowing that if he wins a second term, he’ll bring down prices “very quickly.” And if that scenario came to pass, it would be cheered by the millions of Americans who say higher costs remain a major problem.

There’s only one problem: Key policies that undergird so-called Trumponomics — a combination of tariffs, tax cuts and a crackdown on immigration — are likely to cause a flare-up in inflation, according to many Wall Street economists. That would be a painful outcome for consumers and businesses sapped by more than two years of surging prices. More broadly, renewed inflationary pressures would also come as inflation is finally inching closer to the Federal Reserve’s goal of 2% per year. 

But experts warn that Trump’s economic policies could cause such progress to stall, and even reverse. They note that tariffs effectively act as a consumption tax, increasing the cost of goods imported into the U.S. — costs that businesses typically pass on to consumers. 

Meanwhile, the sharp corporate tax cuts Trump has floated would act as an inflationary fiscal stimulus. And another central plank — deporting immigrants — could force employers to pay higher wages to attract a shrinking pool of workers, also adding to pricing pressures, economists told CBS MoneyWatch.

In such a case, the Fed could be forced to keep its benchmark rate higher for longer, causing more pain for consumers and businesses seeking mortgages, auto loans or other credit products. 

If consumers “are upset now, they will be hopping mad a year from now” about inflation if Trump wins and enacts his policies, Mark Zandi, chief economist of Moody’s Analytics and co-author of a June report on the macroeconomic impacts of either a Trump or Biden win in November, told CBS MoneyWatch.

Zandi, who has previously advised presidential candidates from both parties, said he’s not advising either campaign in the current race.

Where will inflation go in 2025?

Under a Republican election sweep that helps Trump implement his economic agenda, the annual inflation rate would increase to 3.6% in 2025, Moody’s forecasted in its June analysis. By comparison, the most recent inflation data showed that prices rose 3% in June. 

If Biden wins and can continue with his platform, inflation could dip to 2.4% next year, Moody’s projected. 

To be sure, not everyone agrees with such projections. EJ Antoni, a research fellow and public finance economist at the conservative-leaning Heritage Foundation, told CBS MoneyWatch that some economists are making their conclusions “without looking at the broader picture.”

“As far as what [Trump] has said in public, it is to reduce federal income taxes and corporate taxes, and essentially replace that with tariffs,” Antoni said. “I understand the argument that tariffs are a tax on trade, but so is the income tax. If all these things are taxes on trade, do you want a tax on domestic trade or international trade?”

Under this view, additional tax cuts will offset inflation caused by stiffer levies on foreign goods. Trump has floated a 10% across-the-board tariff on all U.S. imports, as well as a 60% tax on products from China. As the 2024 Republican platform puts it, “As tariffs on foreign producers go up, taxes on American workers, families and businesses can come down.”

Although Trump is advocating for a reduction in the corporate tax rate, telling Bloomberg News that he wants to slice it to 15% from the existing 21%, his plans for individual income taxes remain murky. Trump has generally pledged to lower taxes, although many experts believe he would want to extend his 2017 Tax Cuts and Jobs Act, given that many of its tax cuts expire at the end of 2025. 

During his presidency, Trump relied on his executive powers to enact tariffs, meaning that he didn’t have to wait for Congress to pass legislation. Tax cuts, however, would need to be passed by both the House and Senate, a bigger hurdle for Trump to pursue that side of his platform.

Who pays tariffs? 

The typical middle-class household in the U.S. would face an estimated $1,700 a year in additional costs if Trump enacts these proposed tariffs, according to the non-partisan Peterson Institute for International Economics. 

But economists note that low- and middle-income households would feel the impact much more than high-income families. That’s because lower income earners spend a large share of their money on goods and services, so tariffs have a disproportionate impact on them compared with wealthy families. 

“The burden of it is very unequal,” Julia Coronado, founder of MacroPolicy Perspectives and a former Fed economist, told CBS MoneyWatch.

Antoni of the Heritage Foundation pointed out that after Trump levied tariffs on some imports during his presidency, inflation remained low. Indeed, inflation sat at an average rate of about 2% from 2017 to 2019. Yet economists say the scale of his latest plan dwarfs his earlier tariffs. 

“What he’s proposing on tariffs is way beyond anything he did in his first administration,” Coronado noted. “He’s proposing blanket tariffs on all imports, and especially severe tariffs on China — that passes onto consumers immediately.”

Immigration: Costs and benefits

A surge in immigration has expanded the U.S. labor force at a time when it’s facing demographic challenges, such as the aging baby boomer population. That’s helped buoy the labor market, which in turn has helped temper wage increases. 

But Republicans want to deport millions of immigrants, an action that could disrupt the economy and labor market, Coronado said.  “Deporting people is going to be a hit to both demand and supply — you would deport people who are working and spending money in the economy, so growth will slow,” she said.

Antoni notes that immigrants drive up costs for both the federal government and at the local level, which would be eliminated if they were deported.  

Of course, Trump has yet to detail many of his economic plans, such as his policies for individual income taxes. For now, what is known about his platform suggests it could create conditions that boosts inflation, rather than slow it as he has promised, economists said.

“Trump wants a combination of things that economists know don’t add up,” Coronado told CBS MoneyWatch. “He’s promising, ‘I can have my cake and eat it too’.”