Tags: larry summers | recession | tariffs | stocks

50-50 Chance of Recession This Year: Larry Summers

50-50 Chance of Recession This Year: Larry Summers
Former U.S. Treasury secretary Larry Summers speaks during the World Economic Summit in Washington, D.C., on April 17, 2024. (Mandel Ngan/Getty Images)

By    |   Friday, 14 March 2025 09:53 AM EDT

Former Treasury Secretary Larry Summers sees a 50-50 chance of a recession in 2025 due to President Trump’s tariffs, immigration policies and federal government layoffs.

“I’d say there’s a 50-50 chance of a recession starting this year,” Summers told Bloomberg. “When economic revisions start being revised in a direction, there tends to be momentum, and all the revisions are going one way, pointing towards less growth and real uncertainty.”

The steep decline in the stock market and erosion of consumer confidence are also indicators of a possible recession, said Summers, who was Treasury Secretary during the Clinton administration and served as White House Economic Council director under Obama.

On Thursday, the S&P 500 declined by 10% from its February record, putting it in correction territory.

“The more people are looking for sharp cuts by the Fed, the more they’re judging that a recession is likely,” said Summers, who now serves on the board of OpenAI.

Summers called Trump’s tariffs “confused protectionist policy” because “manufacturing has trended downwards for 60 years as a share of the economy,” including even in China, primarily due to automation and assembly lines.

A better approach to rebuilding U.S. manufacturing and jobs, Summers suggested, would be to “subsidize outputs rather than raise the price of manufacturing inputs” via import tariffs. Summers also said it does not make sense to tariff goods made in Canada and Mexico, which, essentially, are manufacturing partners to the U.S.

“We have seen a sea change in perception in the two months since Trump was inaugurated,” said Summers, who was president of Harvard University from 2001 to 2006. When Trump came into office, “the prevailing view was a very strong economy, possibly inflation risk, and United States exceptionalism and outperformance relative to the rest of the world.

“But the combination of the substantial immigration restrictions, substantial federal government layoffs, the damage to U.S. competitiveness and U.S. production done by tariffication, and, above all, a big increase in risk premiums, have led to sharp reductions in consumer and business spending.”

Summers slammed Trump’s “steadfastness on tariffs, economic nationalism and vast, wide interpretation of government” reach for creating market uncertainty.

“Every time he recommits [to the tariffs], pessimism increases,” Summers said.

Asked if he agrees with Trump’s focus on strengthening the U.S. economy in the long term, Summers likened it to the Biden administration’s and the Federal Reserve’s initial dismissal of the severity of inflation.

“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.

As to what investors should pay attention to when deciding how to allocate their portfolios, Summers pointed to forward-looking data, including business orders, consumer sentiment, commodity prices and equity analyst forecasts. If downward revisions in any of these gains momentum, it could be a recession signal, Summers said.

However, the economist conceded that Trump’s trade policies could potentially benefit the U.S., noting: “Studies show that [tariffs] can go either way in terms of their impact in the short run. But it’s almost always bad over the medium to long run.

“So unless there’s a reversal in policy, I would expect this situation to get more serious.”

Lee Barney

Lee Barney, Newsmax’s financial editor, has been a financial journalist for 30 years, covering the economy, retirement planning, investing and financial technology.

© 2025 Newsmax Finance. All rights reserved.


StreetTalk
Former Treasury Secretary Larry Summers sees a 50-50 chance of a recession in 2025 due to President Trump's tariffs, immigration policies and federal government layoffs.
larry summers, recession, tariffs, stocks
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2025-53-14
Friday, 14 March 2025 09:53 AM
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