London Daily

Focus on the big picture.
Tuesday, Nov 11, 2025

Larry Summers: Trump's trade war is a 'Stop, or I'll shoot myself in the foot' strategy

Larry Summers: Trump's trade war is a 'Stop, or I'll shoot myself in the foot' strategy

Former US Treasury Secretary Larry Summers says President Donald Trump's love affair with tariffs is backfiring. And he's not surprised at all.

Breaking from decades of US presidents lowering trade barriers, Trump is waging a global trade war that spread this week to Argentina, Brazil and France. Trump's tariffs are aimed at protecting American workers, but Summers argues it's the US economy that will suffer.

"We are engaged in a stop or I'll shoot myself in the foot strategy," Summers told CNN Business. "It's hard to know just how adverse the impact will be. But the direction is clear."

Summers, who served in the Clinton and Obama White Houses, said tariffs will hurt the competitiveness of US producers that rely on imported goods. That includes everything from car makers to wine distributors. Summers said this will lead to higher prices and lower incomes for American consumers.

Already, the US manufacturing industry is in recession. Factory activity contracted in November for the fourth month in a row. The downturn is being driven by trade tensions as well as weak global growth, which the trade war is exacerbating.

US manufacturing jobs declined by 6,000 in November, according to ADP. The factory job losses contributed to the second weakest private sector payroll growth since March 2010.

"Uncertainty can paralyze economic activity," Summers said.


Trade wars aren't easy to win

Summers knows firsthand. He was a top Treasury official in the late 1990s during the Asian financial crisis and the collapse of hedge fund Long Term Capital Management. Later, he advised President Barack Obama during the worst economic downturn since the Great Depression.

Trump famously declared in March 2018 that "trade wars are good, and easy to win." Nearly two years later, it's clear that hasn't been the case. The United States and China are bogged down in a trade war and Trump suggested this week that a preliminary agreement may not happen until after the 2020 election.

"Ronald Reagan's statement about nuclear war is the more accurate presidential statement about trade wars: They can never be won and should never be fought," Summers said, paraphrasing the former Republican president's 1984 State of the Union address.

Yet trade wars are being fought, posing a risk to the longest economic expansion in American history.

"Trade uncertainty continues to be a black cloud for business investment," David Tesher, managing director at S&P Global Ratings, wrote in a report Tuesday.

S&P sees a 25% to 30% chance of a recession in the next 12 months, although that's an improvement from the firm's previous call.

"We are 10 years into recovery with optimistic asset markets," Summers said, referring to the recent string of records in the US stock market. "We are at a complex moment. Things are more fragile because of our trade war with the world."


Summers: Markets could 'fall a long way' from record highs

US stocks experienced a melt-up that began in early October, catapulting the S&P 500 to 11 record highs in November alone. That powerful advance was driven by easy money from the Federal Reserve, hints of stabilization in the US economy and hopes of a preliminary trade agreement with China.

"Markets are at levels where they could possibly fall a long way. That makes the moment riskier than a normal moment," Summers said.

US stocks fell sharply on Monday and Tuesday as trade tensions erupted again. Trump announced plans Monday to lob tariffs on steel imports from Brazil and Argentina. And the administration threatened to impose tariffs of up to 100% on French champagne, handbags and cheese.

Trump officials also signaled the trade war with China could get worse. US Commerce Secretary Wilbur Ross told CNBC that the United States has more "ammunition" left against China. He warned that the December 15 tariffs on consumer-facing imports from China will take effect "unless there is some reason to postpone them."

The aggressive stance against China is aimed at addressing legitimate and serious grievances with the country's trade tactics. China's alleged theft of intellectual property, for instance, has damaged US businesses and cost jobs.

But there is concern about Trump's use of tariffs as a tool to gain concessions in trade talks.

"He has really instilled a dramatic loss in confidence in the US economic policy apparatus being pro-growth," said Harry Broadman, who served as an economic adviser to former President George HW Bush.


Negative rates can lead to cash hoarding

Investors would look to the Federal Reserve to mitigate the damage caused by a potential escalation of the trade war with China.

However, Summers is concerned that the Fed's recession-fighting toolkit is limited by the fact that interest rates are already low. The October rate cut, the Fed's third in a row, left the federal funds rate at a range of just 1.5% to 1.75%.

"The whole economic system is brittle in a way without precedence in decades, because the normal response to economic difficulty, the Fed reducing interest rates by 500 basis points, is not close to possible right now," Summers said.

Cutting rates by five percentage points would leave the Fed with deeply negative rates. Trump has urged the Fed to adopt the subzero rate strategy implemented by central bankers in Europe and Japan.

"Give me some of that money. I want some of that money. Our Federal Reserve doesn't let us do it," Trump said of negative rates during a speech last month.

But negative rates have failed to revive the economies of Europe and Japan. And extremely negative rates could encourage households to hoard cash, rather than spend it.

"They can't go that negative because people hold currency under the mattress," Summers said.

Newsletter

Related Articles

0:00
0:00
Close
King Charles III Leads Britain in Remembrance Sunday Tribute to War Dead
UK Retail Sales Growth Slows as Households Hold Back Ahead of Black Friday and Budget
Shell Pulls Out of Two UK Floating Wind Projects Amid Renewables Retreat
Viagogo Hit With £15 Million Tax Bill After HMRC Transfer-Pricing Inquiry
Jaguar Land Rover Cyberattack Pinches UK GDP, Bank of England Says
UK and Germany Sound Alarm on Russian-Satellite Threat to Critical Infrastructure
Former Prince Andrew Faces U.S. Congressional Request for Testimony Amid Brexit of Royal Title
BBC Director-General Tim Davie and News CEO Deborah Turness Resign Amid Editing Controversy
Tom Cruise Arrives by Helicopter at UK Scientology Fundraiser Amid Local Protests
Prince Andrew and Sarah Ferguson Face Fresh UK Probes Amid Royal Fallout
Mothers Link Teen Suicides to AI Chatbots in Growing Legal Battle
UK Government to Mirror Denmark’s Tough Immigration Framework in Major Policy Shift
UK Government Turns to Denmark-Style Immigration Reforms to Overhaul Border Rules
UK Chancellor Warned Against Cutting Insulation Funding as Budget Looms
UK Tenant Complaints Hit Record Levels as Rental Sector Faces Mounting Pressure
Apple to Pay Google About One Billion Dollars Annually for Gemini AI to Power Next-Generation Siri
UK Signals Major Shift as Nuclear Arms Race Looms
BBC’s « Celebrity Traitors UK » Finale Breaks Records with 11.1 Million Viewers
UK Spy Case Collapse Highlights Implications for UK-Taiwan Strategic Alignment
On the Road to the Oscars? Meghan Markle to Star in a New Film
A Vote Worth a Trillion Dollars: Elon Musk’s Defining Day
AI Researchers Claim Human-Level General Intelligence Is Already Here
President Donald Trump Challenges Nigeria with Military Options Over Alleged Christian Killings
Nancy Pelosi Finally Announces She Will Not Seek Re-Election, Signalling End of Long Congressional Career
UK Pre-Budget Blues and Rate-Cut Concerns Pile Pressure on Pound
ITV Warns of Nine-Per-Cent Drop in Q4 Advertising Revenue Amid Budget Uncertainty
National Grid Posts Slightly Stronger-Than-Expected Half-Year Profit as Regulatory Investments Drive Growth
UK Business Lobby Urges Reeves to Break Tax Pledges and Build Fiscal Headroom
UK to Launch Consultation on Stablecoin Regulation on November 10
UK Savers Rush to Withdraw Pension Cash Ahead of Budget Amid Tax-Change Fears
Massive Spoilers Emerge from MAFS UK 2025: Couple Swaps, Dating App Leaks and Reunion Bombshells
Kurdish-led Crime Network Operates UK Mini-Marts to Exploit Migrants and Sell Illicit Goods
UK Income Tax Hike Could Trigger £1 Billion Cut to Scotland’s Budget, Warns Finance Secretary
Tommy Robinson Acquitted of Terror-related Charge After Phone PIN Dispute
Boris Johnson Condemns Western Support for Hamas at Jewish Community Conference
HII Welcomes UK’s Westley Group to Strengthen AUKUS Submarine Supply Chain
Tragedy in Serbia: Coach Mladen Žižović Collapses During Match and Dies at 44
Diplo Says He Dated Katy Perry — and Justin Trudeau
Dick Cheney, Former U.S. Vice President, Dies at 84
Trump Calls Title Removal of Andrew ‘Tragic Situation’ Amid Royal Fallout
UK Bonds Rally as Chancellor Reeves Briefs Markets Ahead of November Budget
UK Report Backs Generational Smoking Ban Ahead of Tobacco & Vapes Bill Review
UK’s Domino’s Pizza Group Reports Modest Like-for-Like Sales Growth in Q3
UK Supplies Additional Storm Shadow Missiles to Ukraine as Trump Alleges Russian Underground Nuclear Tests
High-Profile Broodmare Puca Sells for Five Million Dollars at Fasig-Tipton ‘Night of the Stars’
Wilt Chamberlain’s One-of-a-Kind ‘Searcher 1’ Supercar Heads to Auction
Erling Haaland’s Remarkable Run: 13 Premier League Goals in 10 Matches and Eyes on History
UK Labour Peer Warns of Emerging ‘Constituency for Hating Jews’ in Britain
UK Home Secretary Admits Loss of Border Control, Warns Public Trust at Risk
President Trump Expresses Sympathy for UK Royal Family After Title Stripping of Prince Andrew
×