Former US Treasury Secretary and Bloomberg Wall Street Week contributor Lawrence H. Summers talks about the risk of a recession in the US this year, President Donald Trump's trade war and the impact on the economy and the manufacturing sector. He speaks to Bloomberg's David Westin on "Bloomberg Open Interest."
Former Treasury Secretary Lawrence Summers said there’s almost a 50-50 likelihood of the US tipping into a recession this year due to a range of policy steps from the Trump administration that are undermining confidence.
“We’ve got a real uncertainty problem, it’s going to be hard to fix that,” Summers said in an interview on Bloomberg Television’s Wall Street Week with David Westin. “We’re looking at a slowdown relative to what was forecast, almost for sure, and a serious, near 50% prospect of recession.”
Summers pointed to a combination of major immigration restrictions, federal government layoffs and damage to US competitiveness from President Donald Trump’s tariffs as having caused a sea-change in the nation’s economic outlook.
Federal Reserve policymakers, when they meet next week, “need to highlight the very substantial toll that uncertainty is taking on the economy,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. They should also “note that they’ve only got very limited capacity to respond to that uncertainty.”
Trump has already imposed a 20% surtax on Chinese imports since taking office in January, and is preparing a slew of “reciprocal” duties on trading partners for an April 2 announcement. Further tariff hikes are looming on Wednesday on steel and aluminum.
While the Trump administration has said the economy may suffer a “disturbance” as its policies take hold, it will amount to a transition to growth that’s fueled by the private sector and domestic manufacturing rather than federal spending.
“Transition period — doesn’t it sound like a lot like the word transitory?” Summers said, referring to the Biden administration’s dismissal of the 2021 pickup in inflation as a blip that would go away. “I don’t think the idea that this is some kind of transition period is going to work out very well at all.”
Summers said that even if policymakers wanted to adopt a protectionist framework, the current plans for tariffs are counterproductive because they raise the cost of inputs that American factories need.
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