Former U.S. treasury secretary warns Trump's proposed tariffs could boost inflation 

Former U.S. treasury secretary Larry Summers is warning that president-elect Donald Trump's proposed economic policies could drive inflation higher in the U.S.

In an interview airing on Rosemary Barton Live today, Summers, who served in former U.S. president Bill Clinton's cabinet from 1999 to 2001, spoke about the likely consequences of Trump's threat to impose a 25 per cent tariff on all imports from Canada and Mexico.

"I think the more tariffs we impose in the United States, the more inflation we will have," Summers told CBC's chief political correspondent Rosemary Barton.

"And the lesson of the last election is that voters really hate the higher prices that come with inflation."

On Monday, Trump threatened to impose a 25 per cent tariff on all products entering the U.S. from Canada and Mexico on Jan. 20, 2025, unless those countries curb the flow of drugs and illegal migrants across their borders. 

"This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!" Trump wrote on Truth Social.

Trump also vowed to impose an additional 10 per cent tariff on goods entering the U.S. from China until it cracks down on fentanyl smuggling.

Summers said he was surprised by Trump's statement.

"I had not been aware that we had a major issue with migrants coming in illegally from Canada," he said.

"I can't imagine that on issues relating to fentanyl, your government wouldn't be willing to cooperate with ours to the maximum extent possible. So I was surprised by the frontal and hostile nature of the approach that our president [elect] was pursuing."

A 'less efficient global economy'

Summers also served as the director of the National Economic Council from 2009 to 2010 under former U.S. president Barack Obama. He said that if Trump's tariffs are implemented, they will undermine Canada's economy along with many others.

"It can't be good for Canada as an original source of goods exported to the United States," Summers said. "It can't be good for Canada as a producer that takes in imports, processes them and then produces the final product.

"I suspect the end result will be a substantial scrambling of trade flows globally and a less efficient global economy."

In 2022, the U.S. imported $614.3 billion Cdn worth of goods from Canada, according to the Office of the United States Trade Representative. More recent figures from the U.S. Census Bureau show the U.S. imported about $435 billion Cdn in Canadian goods between January and September of this year.

Some of those goods end up in Debbie Kavourias' hardware store in New York.

Kavourias imports aluminum and lumber from Canada, cleaning supplies from Mexico and several other products from China. She said at least 70 per cent of her products overall are imported.

Kavourias said she worries about the impact Trump's proposed tariffs could have on her business.

"My fear would be that we would have to cut down on inventory, or that the inventory wouldn't be available, some of our suppliers will not import as much as they normally do," she said.

"We'd have to pass [the tariff] along to our customers to some degree."

Summers has some advice for the Canadian government on dealing with these tariff threats. 

"Canada has always been a voice for decency in the global system, whether it's with respect to the provision of foreign assistance ... whether it's with respect to global public goods," he said.

"And so I hope that Canada would remain committed to its alliance with the U.S., but also committed to its enduring principles."