The Federal Reserve finally seems to think it has corralled the high inflation of the last three years. So why are the two presidential candidates threatening to unleash it all over again?

Neither Republican Donald Trump nor Democrat Kamala Harris is overtly calling for higher inflation, needless to say. But each is proposing major policies that would be inflationary.

“Trump policies on trade, tariffs, tax, and immigration could increase inflationary concerns,” analysts at investing firm Raymond James wrote in a recent research note. As for Harris’s plans, “historically, subsidies for housing and price caps have created unintended consequences and exacerbated inflationary concerns.”

Each of those policies is meant to win a bloc of voters by appealing to particular concerns. What the candidates don’t tell voters is that those plans could have some unpleasant side effects if they were to ever be fully enacted.

Trump, for instance, wants to hit all imports from China with a new 60% tariff and most other imports with a 20% tariff. Trump’s idea is to make foreign goods more expensive so that domestic producers will be more cost-competitive and sell more stuff made in America.

But that tax on goods would amount to a price hike largely borne by American consumers. The added cost would total around $2,600 per year for the typical family, according to the Peterson Institute for International Economics . That $2,600 annual hit would be far more than food inflation has cost shoppers during the last three years.

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Trump also vows “mass deportation” to round up millions of undocumented migrants and send them out of the country. That appeals to voters who think migrants take American jobs and generate other problems. But most migrants work, and expelling large numbers of migrants would reduce the labor supply.

A supply reduction would push labor costs higher, which would eventually be good for workers earning more. But companies normally pass higher labor costs on to consumers through higher prices, which has been one of the causes of inflation during the past three years. Trump’s deportation plan would cause a fresh jump in labor costs.

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Kamala Harris's plans would generate different types of inflation. Harris is focused on food and housing costs, which have been especially vexing during the Biden administration. Her food plan would focus on ways to stop “price gouging,” or excessive price hikes that are far larger than producers' own cost increases.

But many economists point out that government efforts to control prices are often counterproductive because producers who can’t raise prices will limit supply in order to protect profit margins. When supply falls and prices are capped, the typical outcome is shortages. That’s not inflation, exactly, but it is likely to rile consumers all the same.

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As for housing, Harris is proposing “down payment assistance” of $25,000 for first-time homebuyers. Whether structured as a grant or a loan, there’s widespread evidence that government subsidies drive up costs because they boost demand. Subsidized student loans have driven up college tuition, for instance. COVID-era stimulus payments gave millions of Americans free spending money and contributed to post-COVID inflation. Housing subsidies would almost certainly do the same by creating more buyers and boosting demand for a limited supply of homes.

Oxford Economics estimates that, by 2028, Trump’s policies would push inflation about 0.3 percentage points higher than it would otherwise be. Harris’s policies would add about 0.2 points, with home prices about 0.5 points higher than they would otherwise be.

Those may sound like small numbers, but they have big implications. If the Federal Reserve detects new inflationary pressures, it would likely reverse the rate-cutting policy Chair Jay Powell basically announced on Aug. 23 . Powell is now telegraphing a gradual pace of interest rate cuts for the next couple of years. But he has also made clear the Fed could halt those cuts or even start hiking again if inflation resurfaces.

A key caveat to many of the Trump and Harris policies is that they’d require congressional action to enact, which is unlikely unless the next president governs with his or her party’s unified control of Congress. Divided government is the most likely election outcome, which would scotch partisan legislation needed to provide new homebuyer subsidies, tax breaks, and many other things.

Trump, however, could still raise tariffs and chase down migrants without congressional action. So if he wins, the question may really be whether he’ll do everything he promises to. For now, investors are bullish on Fed rate cuts, which are generally good for profits and stock values. If the presidential outcome changes that outlook, markets will let us know.

Rick Newman is a senior columnist for Yahoo Finance . Follow him on X at @rickjnewman .

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