Famed economist Larry Summers slams Trump’s tariffs as a ‘self-inflicted wound’ on the US economy — warns they will fuel inflation within months

‘Push the economy downwards’

Tariffs don’t just affect the prices of imported goods at the checkout — they also increase costs for businesses that rely on foreign materials. Summers explained that any company using inputs from Canada or Mexico will face a “cost shock” — and they won’t absorb it quietly.

“They’re going to pass it on to consumers,” he said.

That ripple effect may spell trouble for the broader U.S. economy.

“When consumers are paying those higher prices for the imported goods, they're going to have less money to spend on other things, and that's going to tend to push the economy downwards as well,” Summers said.

Summers has long warned that Trump’s policies could fuel inflation. In a November interview with CNN, he predicted that if Trump followed through on his campaign proposals, “there [would] be an inflation shock significantly greater than the one the country suffered in 2021.”

A 2019 study from the Journal of Economic Perspectives by economists from the Federal Reserve Bank of New York, Princeton University and Columbia University analyzed the effects of Trump’s tariffs through late 2018.

Their conclusion was clear: “Our results imply that the tariff revenue the U.S. is now collecting is insufficient to compensate the losses being borne by the consumers of imports.”

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Tariffs as leverage?

While the economic consequences of tariffs seem clear, Trump is using them as a bargaining chip to advance his policy goals — particularly in addressing illegal immigration and fentanyl. But can tariffs help achieve those objectives?

Summers is skeptical.

“I don't think so,” he told Raju. “Think about what giving into a bully does? It invites more bullying … On the playground or in international relations, bullying is not an enduringly winning strategy.”

Despite Summers’ doubts, both Mexico and Canada have taken action as part of an agreement with the U.S. to delay the tariffs.

Mexican President Claudia Sheinbaum recently announced on X that 10,000 National Guard troops will be deployed to the northern border to combat drug trafficking, particularly fentanyl.

Meanwhile, Canadian Prime Minister Justin Trudeau said the country will be “reinforcing the border with new choppers, technology and personnel, enhanced coordination with our American partners and increased resources to stop the flow of fentanyl.”

Trudeau also said Canada will appoint a “Fentanyl Czar,” officially designate cartels as terrorist organizations and establish round-the-clock surveillance on the border.