Former US Treasury secretary says trade tensions putting American workers at risk
Lawrence Summers predicts 'American workers are going to be poorer' over US-China dispute
The US economy and the wider global economy will suffer as a result of ongoing trade tensions, former US Treasury secretary Lawrence Summers said, while lambasting President Donald Trump’s trade policies on China.
“I don’t think there’s any question that American workers are going to be poorer, American companies are going to be less profitable and the American economy is going to be worse off because of the course we are on,” he said in an interview on CNN’s “Fareed Zakaria GPS”, which was aired on Sunday.
“We are losing very substantial amounts in terms of uncertainty, reduced investment, reduced job creation for the sake of benefits that are very unlikely to be of substantial magnitude.”
Mr Summers, who was director of the National Economic Council during the Obama administration and a former chief economist of the World Bank, also said tariff strategies of the Trump administration will lead to job losses, hurting the economy of the US.
“All the evidence is that when you engage in these tariff strategies, you spend more than a million dollars a year per job saved and probably, ultimately when you trace it all through you destroy more jobs than you create.”
The comments come as the International Monetary Fund (IMF) in July cut its global growth forecast for the year for the fourth time since October, saying trade tensions and continued Brexit uncertainty could impede a “precarious” recovery next year.
Global economic growth, already at the lowest level since the 2008 financial crisis, is estimated to slow to 3.2 per cent in 2019, a 0.1 percentage point drop from the IMF’s projection in April, as lower inflation and softer growth projections of economies around the world point to weaker economic activity.
The world economy will accelerate 3.5 per cent in 2020, slower than the April projection of 3.6 per cent, the international lender said in its latest World Economic Outlook.
“Policy actions and missteps have played an important role in shaping these outcomes, not least through their impact on market sentiment and business confidence,” the IMF said. Errors in policymaking and the associated uncertainties will have a “severely debilitating effect on sentiment, growth and job creation”.
The IMF managing director Christine Lagarde also told Reuters in an interview earlier this year the trade war between the US and China could be a risk to the world economic outlook if it is not resolved.
"Obviously, the downside risk that we have is continued trade tensions between the United States and China," Ms Lagarde said. “And if these tensions are not resolved, that clearly is a risk going forward.”
The US and China, the world’s two largest economies, are currently engaged in a trade war, levying tariffs on each other’s imported goods and impacting growth in both countries. The US increased tariffs on $250 billion (Dh917bn) of Chinese goods in May, while Beijing responded with additional levies on nearly $60bn of US imports. Washington is set to levy another 10 per cent in duties on $300bn of Chinese imports next month.
Goldman Sachs also said on Sunday that fears of the US-China trade war leading to a recession were growing and that it no longer expects a trade deal between the world’s two largest economies before the 2020 US presidential election.
“We expect tariffs targeting the remaining $300bn of US imports from China to go into effect,” the bank said in a note sent to clients.
President Trump announced on August 1 that he would impose a 10 per cent tariff on a final $300bn worth of Chinese imports on September 1, prompting China to then halt purchases of US agricultural products.
Updated: August 12, 2019 12:29 PM