Former Treasury Chief Calls US a 'Problematic Emerging Market'
Larry Summers warns that Trump's tariff chaos poses a risk of a self-inflicted financial crisis Former US Treasury Secretary Lawrence H. Summers has issued a warning regarding President Donald Trump’s intensifying global tariff war, stating...
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Larry Summers warns that Trump's tariff chaos poses a risk of a self-inflicted financial crisis
Former US Treasury Secretary Lawrence H. Summers has issued a warning regarding President Donald Trump’s intensifying global tariff war, stating that it is pushing the United States towards a potential financial crisis. He drew parallels between the recent market turmoil and the conditions typically observed in unstable emerging economies.
On Wednesday, prior to Trump's unexpected announcement of a 90-day suspension of the latest tariff hikes, Summers remarked that the volatility in the US and global markets was “wholly induced by US government tariff policy.”
“Long-term interest rates are gapping up, even as the stock market moves sharply downwards,” Summers shared in a series of posts on X. “This highly unusual pattern suggests a generalized aversion to US assets in global financial markets. We are being treated by global financial markets like a problematic emerging market.”
Summers, who served as Treasury Secretary under President Bill Clinton, cautioned that the interplay of rising government debt, growing deficits, and foreign investor anxiety could initiate a perilous downward spiral. “This could set off all kinds of vicious spirals, given government debts and deficits and dependence on foreign purchasers,” he stated.
Trump’s recent decision to impose a “baseline” tariff of 10% on all imports and increase tariffs on Chinese goods to 125% sent shockwaves through US financial markets, resulting in a loss of more than $10 trillion in stock market value. Concurrently, the yield on the 10-year Treasury bond—a typical safe haven in times of market stress—climbed to nearly 4.5%. The announcement of a 90-day freeze on further tariff hikes led to a significant rebound on Wall Street, although markets only reclaimed about half of their previous losses.
Following Trump’s reversal on Wednesday, Summers reiterated his criticisms, calling the administration's policymaking reckless and detrimental to America’s reputation on the global stage.
“Bullies back down. It is tragic to see the United States following banana republic policy approaches and market patterns,” Summers wrote. “The Administration was crowing over the weekend about all the countries that wanted to talk. No postponement then. Now they are rightly scared after collapsing markets.”
Summers criticized the White House’s trade strategy as “reckless improvisation, not a strategy,” and accused officials of misleading the public about their intentions.
“Even their new regime has tariffs near Smoot-Hawley levels and will cost middle-class families close to $2,000,” he noted, referencing the infamous 1930s tariff law often blamed for worsening the Great Depression. “We are far from being out of the woods. Much credibility has been lost. Be afraid.”
While the White House defends its tariff actions as essential for protecting American jobs and ensuring fair trade practices, critics like Summers contend that such unpredictable policy swings have unsettled investors and pose a threat to the long-term health of the US economy.
Thomas Evans for TROIB News
Former US Treasury Secretary Lawrence H. Summers has issued a warning regarding President Donald Trump’s intensifying global tariff war, stating that it is pushing the United States towards a potential financial crisis. He drew parallels between the recent market turmoil and the conditions typically observed in unstable emerging economies.
On Wednesday, prior to Trump's unexpected announcement of a 90-day suspension of the latest tariff hikes, Summers remarked that the volatility in the US and global markets was “wholly induced by US government tariff policy.”
“Long-term interest rates are gapping up, even as the stock market moves sharply downwards,” Summers shared in a series of posts on X. “This highly unusual pattern suggests a generalized aversion to US assets in global financial markets. We are being treated by global financial markets like a problematic emerging market.”
Summers, who served as Treasury Secretary under President Bill Clinton, cautioned that the interplay of rising government debt, growing deficits, and foreign investor anxiety could initiate a perilous downward spiral. “This could set off all kinds of vicious spirals, given government debts and deficits and dependence on foreign purchasers,” he stated.
Trump’s recent decision to impose a “baseline” tariff of 10% on all imports and increase tariffs on Chinese goods to 125% sent shockwaves through US financial markets, resulting in a loss of more than $10 trillion in stock market value. Concurrently, the yield on the 10-year Treasury bond—a typical safe haven in times of market stress—climbed to nearly 4.5%. The announcement of a 90-day freeze on further tariff hikes led to a significant rebound on Wall Street, although markets only reclaimed about half of their previous losses.
Following Trump’s reversal on Wednesday, Summers reiterated his criticisms, calling the administration's policymaking reckless and detrimental to America’s reputation on the global stage.
“Bullies back down. It is tragic to see the United States following banana republic policy approaches and market patterns,” Summers wrote. “The Administration was crowing over the weekend about all the countries that wanted to talk. No postponement then. Now they are rightly scared after collapsing markets.”
Summers criticized the White House’s trade strategy as “reckless improvisation, not a strategy,” and accused officials of misleading the public about their intentions.
“Even their new regime has tariffs near Smoot-Hawley levels and will cost middle-class families close to $2,000,” he noted, referencing the infamous 1930s tariff law often blamed for worsening the Great Depression. “We are far from being out of the woods. Much credibility has been lost. Be afraid.”
While the White House defends its tariff actions as essential for protecting American jobs and ensuring fair trade practices, critics like Summers contend that such unpredictable policy swings have unsettled investors and pose a threat to the long-term health of the US economy.
Thomas Evans for TROIB News
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