Early in the Biden administration, former Treasury Secretary Lawrence Summers correctly warned that the president’s policies were likely to lead to inflation. He offered the same prediction Sunday about tariffs newly imposed by President Donald Trump.
“This is a self-inflicted wound to the American economy,” Summers told host Manu Raju on CNN’s “Inside Politics.” “I’d expect inflation over the next three or four months to be higher as a consequence, because the price level has to go up when you put a levy on goods that people are buying.”
Summers also used the phrase “self-inflicted” in saying that the tariffs imposed on Canada, China and Mexico would lead to a “supply shock.”
“This is what economists would call a self-inflicted supply shock,” he told Raju. “It means less supply because we’re taxing foreign suppliers. And that will mean higher prices and lower quantities.”
Summers also predicted that the Trump administration’s tariffs would not lead to policy concessions from these nations or others. Trump and other Republicans have talked about the tariffs in the context of immigration, among other things.
“On the playground or in international relations, bullying is not an enduringly winning strategy. And that’s what this is,” Summers said.
Canada and Mexico, whose economies are tightly connected to the U.S. economy, have already chosen to slap their own tariffs on American products.
Summers, who also served as director of the National Economic Council during the Obama administration, said he thought that ultimately the big winner in this trade war could be Chinese President Xi Jinping.
“We’ve given him an excuse for his own economic failures,” Summer said of Xi. “We’ve moved to drive some of our closest allies into his arms. We’ve weakened our own economy. And at a time when were calling him out for ignoring international norms, we’re legitimating everything he’s doing by violating all the international norms that we set up.”
