Trump’s proposed fiscal path contains multiple elements, the first being tariffs. In a bid to tilt trade in favor of the US, Trump has made wide-sweeping duties a cornerstone of his international platform. Virtually all US imports would be taxed at 10%, he’s said, though this rate would be as high as 60% for key competitors, such as China. It’s a much more aggressive approach than Biden’s actions so far, which have included a 100% tariff on Chinese electric vehicles.

Trump has also floated the idea of using tariffs in place of the US income tax. The plan was well received by the House Republicans who first heard it.

But in certain economic circles, many have disagreed with these policies while warnings of price hikes and global trade wars.

The camp staunchly opposed to Trump’s policies

The base argument against Trump’s fiscal platform is that tariffs are, by nature, inflationary. According to the nonpartisan Tax Foundation, when imported goods get levied, their producers either lift prices or pull the product out. That lowers supply, boosting costs on domestic goods as well.

JPMorgan’s chief global strategist David Kelly has called the proposals an “elixir for stagflation.” That description was outdone by former Treasury Secretary Larry Summers, who characterized the income-tax-replacement idea as the “mother of all stagflations.”

Further, Nobel-winning economist Paul Krugman recently made the argument in a New York Times op-ed that Trump’s proposed tariffs would benefit only the wealthiest Americans. He also predicted that 80% of US consumers would end up losing after-tax income.

In numerical terms, Goldman Sachs estimated that the policies would cause US GDP to drop 0.5%, while pushing inflation up 1.1 percentage point. The firm says that’s enough to force a 130-basis-point increase in interest rates, at a time when most investors want borrowing costs to climb down.

The Peterson Institute offers a more drastic outcome: a full-fledged global trade war. The nonpartisan think tank notes that the last time blanket tariffs were implemented nearly a century ago, it contributed to the Great Depression.

But not everyone shares this degree of skepticism.

The camp that says it won’t be as bad as feared

Longtime market veteran Ed Yardeni, the president and chief investment strategist at Yardeni Research, falls into this group.

In a recent op-ed for the Financial Times, he cited the “benign” impact Trump’s first-term tariffs had on the US economy. He noted that real GDP rose to a record 8.5% between the fourth quarter of 2016 to the fourth quarter of 2019, leading up to the pandemic. Further, inflation stayed at about 2% that whole time.

Looking ahead to a new term, Yardeni thinks Trump’s most extreme pursuits will likely be watered down by Congress. He also says Republicans’ pro-business support for oil and gas production will keep a lid on consumer prices and counteract inflationary pressure.

Famed “Big Short” investor Steve Eisman was more bluntly skeptical of inflation impact in a recent CNBC interview:

“Do I think that Donald Trump will increase tariffs on China? Sure. Do I think that would have a massively inflationary impact on the US? I think that’s ridiculous.”

Republican donor Kyle Bass — who serves as the chief investment officer of Hayman Capital Management — has taken a different tact in his support of Trump’s fiscal agenda. He thinks Trump is intentionally over-exaggerating his plan, and what he would actually enact would be more restrained.

“Hyperbole is useful to kick the hornet’s nest,” he told CNBC last month.

It ultimately depends on Congress

The Nobel prize-winning economist Joseph Stiglitz represents a sort of middle ground between the two polarized factions. Although he was one of 16 economists to sign an open letter warning that Trump’s policies could drive inflation higher, he also says — similar to Yardeni — that a lot depends on Congress.

“I think general consensus, not just my view, but almost anybody modeling what is going on would say the Trump administration would be more inflationary,” he told Business Insider. “How much more depends on how radical they are. And that depends on where Congress is.”

The chart below from Oxford Economics shows these unique dynamics in action. Although the a “full-blown Trump” administration would be the most inflationary outcome during the next presidential term, the data shows that a Trump win under a divided government would be less inflationary than a “baseline Biden” regime.