‘Confidence Has More Room To Decline’

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Former Treasury Secretary Lawrence Summers cautioned that the United States may be heading into a period of stagflation led by President Donald Trump’s trade and tariff policies, citing the lingering effects of tariffs and rising risks for both unemployment and inflation.

On Thursday, in a post on X, Summers highlighted a snippet from his recent online conversation at The New York Times, discussing Wednesday’s Federal Reserve meeting, and the broader state of the economy.

Summers said in his post, “I think we may be at the foothills of stagflation,” adding that the economic impacts of the tariffs are yet to be “fully felt.” Summers also pointed to broader sentiment risks, suggesting that consumer and business confidence could deteriorate further. “Confidence has more room to decline than to rise,” he said.

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“I think inflation will surprise a bit on the high side,” he said, hinting that price pressures might outpace current expectations.

The economist, who previously served as Treasury Secretary under President Bill Clinton and as a top economic adviser to President Barack Obama, suspects that “we are seeing unemployment and inflation forecasts both being revised up.”

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Summers’ warning has been echoed by other economists, including University of Michigan professor Justin Wolfers, who pointed to the Fed Chair’s remarks on weak job growth, higher unemployment and stubborn inflation, concluding that “stagflation is in the room.”

Wolfers had made similar claims early this month, referring to the outcome of Trump’s tariffs as “two bad tastes at the same time,” that is, rising unemployment, amid elevated inflation levels.

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This article Trump’s Tariffs Leading US To The ‘Foothills of Stagflation,’ Warns Larry Summers: ‘Confidence Has More Room To Decline’ originally appeared on Benzinga.com