Larry Summers on The Trump Tariffs

 Larry Summers, the Secretary of the Treasury under Bill Clinton, is famous for correctly warning the Biden Administration that his stimulus bill would cause inflation.  While roundly criticized (often in very harsh terms) at the time, Larry Summers was right.  The Free Press  has a must read interview with Larry Summers about the economic impact the the newly announced tariffs on Canada, Mexico and China.  Spoiler alert:  it is not good.  He notes that they represent the "largest protectionist steps that the United States has taken since the Second World War" that will push the U.S. toward stagnation (higher inflation and lower or even reduced economic growth):

This is a self-imposed supply shock. It lowers the quantity of goods available to the American economy, and raises their prices. So, as markets are recognizing, they represent a push toward stagflation—which means higher inflation and slower economic growth. Quantifying the stagflationary impulse is hard because we don’t know how long the tariffs are going to last, in what ways they are going to be extended, or in what ways other countries are going to retaliate. But there’s no question that the adverse stagflationary impulse exceeds the impulse that would come from a 50 percent, or more than $40, oil price increase. This is the equivalent of a massive oil shock.

.  .  .

These policies are a major penalty to U.S. consumers that reduce the real income of middle-class families. They are a pro-inflation impulse and, ironically, they help exporters to the United States at the expense of American producers, and they penalize American exporters. I have never seen as irrational a consequential policy put in place by an American administration.

The entire interview is well worth reading.   While Larry Summers is a Democrat, his views are shared by voices on the right as well.  The famously conservative Wall Street Journal editorial board called to Mexico and Canada tariffs the "dumbest in history."