Wall Street’s big question: How far would Trump go on tariffs?

In a speech last week billed as a major economic address but that often veered far off topic, Trump doubled down on his commitment to new tariffs, pledging to implement “10 to 20 percent tariffs on countries that have been ripping us off for years."

A drumbeat of reports from Wall Street economists have warned that Trump’s plans could substantially slow economic growth while driving up consumer prices. But there is considerable debate about what the former president would—or even could—do with tariffs if he won a second term.

Here is a look at how investors are trying to make sense of Trump’s ideas on trade, and what those plans might mean for markets.

A big shift

On the face of it, Trump is proposing a radical overhaul of U.S. tariff policy, going far beyond what he did during his first four years in the White House.

Starting in 2018, Trump imposed tariffs on about $380 billion of goods, mostly from China, according to the Tax Foundation.

The Biden administration kept most of those tariffs and added additional levies on roughly $18 billion of Chinese imports.

In the current election, however, Democrats haven’t indicated support for additional tariffs. Trump, meanwhile, has advocated for what his campaign website has called a system of “universal baseline tariffs" that “rewards domestic production." Trump has suggested the tariffs could be set at 10%, with revenue being used to reduce the deficit or pay for new tax cuts.

Elsewhere, Trump has indicated he would support tariffs of at least 60% on Chinese imports to reduce trade with the world’s second-largest economy.

Currently, the average effective tariff—as measured as duties as a share of imports—is around 1% on imports from countries excluding China and 11% on Chinese imports, according to Wolfe Research, a stock-market research firm.

A threat to growth

Tariffs aren’t applied to foreign countries but rather to domestic businesses that import products. Economists say those businesses usually pass on the bulk of the cost to consumers by raising prices.

In the short-term, most agree that universal tariffs would drive up consumer prices and drag on economic growth by effectively taxing households and discouraging spending.

Even then, some economists argue that benefits to certain businesses, such as steel manufacturers, could be offset by harms to others, such as automakers forced to pay more for steel. Exporting businesses could be hurt by countries introducing retaliatory tariffs.

Analysts at TD Securities estimate that a 10% universal tariff would increase inflation by 0.6 to 0.9 percentage point. Combined with Trump’s plans to restrict immigration, they calculate the tariffs would reduce growth by 1 to 2 percentage points, potentially tipping the economy into a recession.

Other economists have arrived at similar forecasts. Standard Chartered has estimated Trump’s tariff plans would raise prices by 1.8% over two years.

Most economists believe tariffs would lead to a quick jump in consumer prices but not persistent increases. The Federal Reserve might therefore ignore the initial impact on inflation—though some analysts believe it could cause the central bank to slow interest-rate cuts.

A drag on markets

Trump’s previous tariffs had micro and macro effects on the stock market.

His threats to impose tariffs on Mexican imports at one point drove down shares of automakers with manufacturing operations across the border. More broadly, analysts said his tariffs contributed to declines in stock indexes in 2018 by creating uncertainty about the economic outlook.

This time around, Wall Street is again looking at potential winners and losers from Trump’s proposals.

Analysts at Jefferies have said higher tariffs could help steelmakers like Cleveland Cliffs and U.S. Steel by discouraging imports from foreign competitors, while hurting importers such as Lululemon Athletica and Best Buy by squeezing their profit margins.

Mostly, though, the breadth and scale of Trump’s tariff proposals have investors focusing on their potential overall economic impact.

On paper, Trump’s tariff plans would create a bigger drag on the economy than Democratic plans to let tax cuts on upper-income households expire at the end of 2025, according to Wolfe Research. That is because the effective tax increase would be bigger, and because it would affect lower—and middle-income households, which are more sensitive to changes in costs.

But many investors are skeptical that Trump would raise tariffs by as much as he has promised and are more confident that he would extend tax cuts and reduce regulations on businesses, especially if Republicans also win control of Congress. That could lead to at least a small-scale repeat of 2016, when a Trump-led Republican sweep spurred a large rally in stocks.

A potential pathway

From a practical perspective, it is easy for a president to raise tariffs.

He or she can unilaterally raise tariffs on specific imports for a range of reasons, including if a country violates U.S. trade laws. As a result, most analysts believe that Trump would have little trouble raising tariffs on Chinese imports, given China’s own trade practices.

Many are skeptical that existing law would allow him to implement an across-the-board 10% tariff without the support of Congress. But Trump could use a “flood the zone" approach, applying tariffs on imports from a range of countries, using whatever legal justification is most appropriate in each case, said Andy Laperriere, head of U.S. policy research at Piper Sandler.

While some analysts don’t think that Trump would do anything to seriously upset the stock market, others believe that Trump’s boasts about stocks doing well in his first term were opportunistic rather than a statement of priorities.

Trump also now has more Republican allies who share his views on trade, potentially giving him momentum to go further than he did before.

In a second term, “he’s going to be surrounded by people who either agree with him on tariffs or have made their peace with the fact that that’s what he’s going to do," Laperriere said.

Write to Sam Goldfarb at sam.goldfarb@wsj.com