Summers, Former US Treasury Secretary: "Trump's Pledge Triggers Greater Inflation Increase Than Biden"

Former U.S. Treasury Secretary Lawrence Summers expressed concerns that inflation could surge again. He warned that the policies of President-elect Donald Trump, such as tariffs and immigration, could trigger even greater inflation than under the Joe Biden administration.

According to CNN on the 12th (local time), Summers said, "It may be difficult to bring inflation back to a stable level."

Lawrence Summers, former U.S. Secretary of the Treasury. AP·Yonhap

Summers, an economist who served as Treasury Secretary under the Clinton administration and as president of Harvard University, stated, "I believe the Federal Reserve (Fed) and the market still underestimate the risk of overheating," adding, "I ask myself why lowering interest rates should be a priority in such an environment." He pointed to core inflation exceeding targets, a rapidly growing economy, and a blazing financial market.

The Fed cut interest rates consecutively in September and November and signaled the possibility of further cuts. Summers expressed concern that the Fed might be repeating the "surprising and enormous mistake" it made in 2021. He said, "I worry that after being burned once by inflation risks, the Fed will not be cautious the second time but will get burned twice." Summers had warned about inflation risks in 2021 when attention was focused on the economic recovery from the COVID-19 pandemic, and that warning proved accurate.

Of course, current prices have not surged as sharply as in the early Biden administration. The Consumer Price Index (CPI) in September rose 2.4% year-on-year. The market expects the October CPI to rise to 2.6%, which is significantly lower than the mid-2022 peak of 9%. Fed Chair Jerome Powell said inflation is on a "sustainable path" toward the 2% target but noted that work on inflation is not yet finished. CNN pointed out, "Notably, Summers' warning did not take into account the Trump administration's policies that could cause inflation."

Summers expressed concern that President-elect Trump's pledges could reignite inflation. He said, "There is a high risk that Trump will try to implement what he has said. If that happens, the result could be inflation even greater than that caused by the Biden administration's excessive economic stimulus."

In particular, he warned that if tariffs are imposed beyond their use as a tool for trade negotiations, significant supply shocks could occur due to price increases.

Trump's repeated emphasis on deporting illegal immigrants is also a concern. Summers said, "Efforts should be made to address immigration issues, but deporting millions of workers poses a significant risk of labor shortages, which could ultimately lead to inflation."