Inflation will go up regardless of who the next president is, but under Trump’s tariffs it would be higher for longer, Oxford Economics says

Former President Donald Trump has said that should he win a second term he would implement a 10% tariff on all foreign goods coming into the U.S.

Stubbornly high inflation has been showing signs of abating in recent months, but one prominent research firm is betting it’s set to rise. And the reason? To paraphrase a Clinton-era political saying, it’s the election, stupid.

Regardless of whether Joe Biden or Donald Trump wins a coveted second term, inflation will increase, predicts the research firm Oxford Economics. The question is how much. Both presidents’ policies are inflationary, albeit in different ways, Oxford says. And while the broad trend lines of the economy will remain the same regardless of who controls the White House or Congress, how steep they end up being could change drastically from one political reality to another.

“It’s only the degree to which GDP and inflation are higher under the next president that differs depending on the political configuration,” wrote Oxford Economics deputy chief U.S. economist Bernard Yaros Jr. in a research note published last week.

Under a Trump presidency, peak inflation would be 0.6 percentage points higher than the current 3.3%, according to Oxford Economics’ analysis. That means inflation would reach 3.8%. Under Biden, Oxford predicts, inflation would be just 0.1% higher than it is now.

The main drivers of inflation under Trump would be his draconian immigration policies, which would shrink the available workforce; a further cut of corporate tax rates, and, most notably, an unprecedented set of tariffs on all foreign goods. Meanwhile, Oxford Economics assumes that Biden would temporarily extend the Child Tax Credit, leading to a near-term spike in inflation, as low-income families spend their tax refunds at a time when the economy requires less spending. Eventually that increase in inflation would give way to a period of stable economic growth, Yaros told Fortune.

In the long run, “family support policies stimulate growth without raising inflation because they boost the economy, not by having people spend, but by allowing more working mothers to participate in the labor force,” he says.

Notably, under neither Biden nor Trump would inflation decline or even remain at its current levels, according to Yaros’ analysis.

Federal Reserve chair Jerome Powell was slightly more optimistic about inflation coming down over the course of his two-day Senate testimony on Tuesday and Wednesday. Although Powell remained circumspect on when exactly he expected inflation to head toward the Fed’s 2% target.

‘Tariff man’

For Yaros, though, taming inflation will be even less likely if either the Democrats or the Republicans win both the White House and control of Congress. “If there is a sweep by either party, the incentive to enact a lot of changes—whether it’s spending increases or tax cuts—it’s just going to be too large of an appeal to ignore,” he said.

But that doesn’t mean the effects on inflation will be the same. Trump’s proposed tariffs would be especially inflationary, contributing a “large chunk” to rising prices, according to Yaros. Even During his first term Trump made no secret of his affinity for tariffs, referring to himself as a “Tariff Man.”

Yaros assumes that under a Trump presidency he would succeed in implementing his recently announced blanket tariffs. Trump’s unprecedented proposal includes a 60% tariff on all Chinese goods and a 10% tariff on goods from any other country. If implemented they would almost certainly act as a tax on American households, as businesses would simply raise prices and pass on their added costs to consumers.

Other economists have agreed with Yaros that the tariffs could be inflationary. Several different studies estimated Trump’s proposed tariffs would amount to a $1,700 to $2,350 increase in annual expenses for households.

In a Time magazine interview from April where Trump resurfaced his tariff policies, he acknowledged they raised prices, but denied the increase would be inflationary. “I don’t believe it’ll be inflation,” the former president said. “I think it’ll be lack of loss for our country.”

Economists have warned that Trump’s proposal would lead to an all-out trade war with China and possibly other countries. China would almost certainly retaliate with its own set of tariffs on American goods, further putting businesses under water, says Alan Wolff, a fellow at the Peterson Institute for International Economics and a former deputy director of the World Trade Organization.

“For the Trump approach to somehow work, one has to assume there’s no foreign reaction…no retaliation,” Wolff says.

Biden, too, has implemented tariffs, but he has done so strategically, according to Wolff. “The Biden approach is thinking selectively about how we give an advantage to domestic production where we have decided we need domestic production,” Wolff says. “Trump is more [tariffs] across the board ‘let’s see how it all works out.’”

Biden’s high tariffs are meant to ensure certain products deemed in the national interest are independent of global supply chains—specifically, semiconductors, which are considered a national security priority, and technologies needed to address climate change, “which is not a Trump priority at all,” Wolff says. In May the Biden administration implemented a series of tariffs on China, including a 50% tariff on computer chips and varying other taxes on foreign solar cells, EVs, and the batteries that power them.

Even though Biden has taken a more strategic approach to Chinese tariffs, his administration is unlikely to ease up on those already in place, according to recent comments from a top Treasury official. On Wednesday Biden announced a new round of tariffs on Chinese steel coming into the U.S. from Mexico, long seen as a loophole to circumvent trade regulations.