"Tariff Policy Should Be Withdrawn"
"Tax Hikes Leading to Recession Is Introductory Economics"
Former U.S. Treasury Secretary Larry Summers warned on the 8th (local time) in an interview with Bloomberg Television that the U.S. economy is highly likely to enter a recession and that about 2 million Americans could lose their jobs due to tariff increases.
Former Secretary Summers predicted that U.S. household income would decrease by about $5,000 (approximately 7.43 million KRW) per family as a result of the recession and unemployment.
Lawrence Summers, former U.S. Secretary of the Treasury.
Regarding President Trump's tariff policy, he said, "There will be very important choices in the coming weeks," and stated that the current policy surpasses the 1930 tariff plan that deepened the Great Depression (Smoot-Hawley Tariff Act, which imposed an average tariff of 59% on about 20,000 products). He also advised the Trump administration, "It would be wise to withdraw the announced policy."
Former Secretary Summers evaluated, "The financial markets are speaking surprisingly clearly about the impact of tariffs." This means that stock prices surge when articles suggest easing measures like a 90-day tariff suspension fake news, and stock prices plummet when news indicates tariffs will continue. He added, "There is a very high possibility that the market will reach a level significantly lower than the current one during a recession," and "It would be truly surprising if this phase and the market had already bottomed out." On that day, the S&P 500 index in the New York stock market fell below 5,000 for the first time in a year, but he explained that there is a possibility of further decline.
He said that the U.S. recession would cause various negative effects such as an expansion of the fiscal deficit, and "financial difficulties will arise that will affect high-risk companies and high-risk countries in the global economy."
Former Secretary Summers said, "I am more concerned about the message the market sends externally than the internal soundness of the market. I consider the external message a warning," and added, "The market is a very important signal showing where the situation is heading when corporate executives or academic leaders do not express concerns about the policy."
He pointed out, "The U.S. is facing a recession caused by its own policies for the first time," and said, "No one in the outside world is causing this challenge (recession). It is induced by the words and actions of President Trump and his administration." He also said, "I do not know if there is a historical precedent for what is happening now," but added, "If the government withdraws policy errors, the economy will normalize considerably."
Also a Harvard University professor, former Secretary Summers said, "This is not a complicated issue. It is introductory economics that a large tax increase on the middle class, implemented along with uncertainty, hits businesses and drives the economy into a downturn," and added, "Even someone with a B grade knows this. The answer to that is a supply shock, which raises prices and increases unemployment."
Former Secretary Summers stated that if the U.S. raises tariff rates to pre-World War II levels, "It will cause enormous costs to the U.S. and global economies," and "If all of this is implemented for sure, market losses will reach trillions of dollars. And the stock market only measures a very small part of the economic losses caused by these policies."
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