Ex-Treasury director says US looks like ‘problematic emerging market’
(MENAFN) Former US Treasury Secretary Lawrence H. Summers has issued a stark warning, stating that President Donald Trump's escalating trade war is pushing the United States toward a financial crisis. He compared the current market instability to the conditions often seen in volatile emerging economies.
Speaking before Trump announced a 90-day pause on new tariff hikes, Summers argued that the turmoil in US and global markets was entirely the result of US government tariff policies. He pointed out the unusual financial patterns of rising long-term interest rates combined with a sharp decline in stock market values, indicating global investors' aversion to US assets.
Summers, who served as Treasury Secretary under President Bill Clinton, expressed concern that the combination of rising government debt, growing deficits, and anxiety from foreign investors could create a dangerous downward spiral. He warned that this situation could lead to negative economic consequences, particularly given the country's reliance on foreign investment.
The volatility began last week after Trump imposed a 10% tariff on all imports and raised the tariff on Chinese goods to 125%, which sent US financial markets into a tailspin, wiping out over $10 trillion in stock value. Although a temporary freeze on tariff hikes prompted a recovery, markets only regained about half of the losses.
Summers criticized the administration's handling of the situation, accusing them of reckless policy decisions and undermining America's credibility on the global stage. He warned that the tariff policy, reminiscent of the 1930s Smoot-Hawley tariffs, could cost middle-class families thousands of dollars and cause lasting damage to the US economy.
Despite the White House's defense of its tariff strategy, which it claims is meant to protect American jobs and secure fairer trade agreements, Summers and other critics argue that the policy's unpredictability is harming investor confidence and could lead to long-term economic damage.
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