Fmr. Treasury Secretary Summers says there is a 50% chance of recession
Mar. 11, 2025 1:06 PM ET
By: Monica L. Correa, SA News Editor
Former Treasury Secretary Lawrence Summers said there is almost a 50% chance of a recession for the U.S. this year due to policy changes from the Trump administration and uncertainty in the markets.
During a Bloomberg TV interview, Summers, who served at the Treasury during the Clinton administration and as National Economic Council director under President Barack Obama, said that the U.S. has a “real uncertainty problem” that will be hard to fix.
“We’re looking at a slowdown relative to what was forecast, almost for sure, and a serious, near 50% prospect of recession,” due to major immigration restrictions, federal government layoffs, and tariff increases by President Donald Trump to the U.S.’s trade partners, he said.
Summers added that the Federal Reserve must “highlight the very substantial toll that uncertainty is taking on the economy” as “they’ve only got very limited capacity to respond to that uncertainty.”
The Trump administration said the economy may suffer a disturbance in the meantime, which will transition into growth in hopes put on the private sector and increased domestic manufacturing.
But “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.
“Your chances would be much better subsidizing their outputs than raising the price of manufacturers’ inputs,” he added. “It’s misguided and confused protectionist policy — even if one accepted the protectionist philosophy.”
He said that Latin America’s economic history is an example of how protectionism can go wrong. “What the studies show is that it can go either way in terms of its impacts in the short run, but it’s almost always bad over the medium-to-long run. Unless there’s a reversal in policy, I would expect this situation to get more serious.”
Lastly, Summers said that the Fed’s interest rate cuts may not be enough to encourage economic growth if businesses are hurt by uncertainty over economic policies.
“When there’s so much swirling uncertainty and the props from under your investment might be removed by some new policy, coming out of some decree, you’re going to wait before you invest,” he said. “And the exact level of the interest rate isn’t going to matter very much.” |
