Former Treasury Secretary Larry Summers says President Trump has it all wrong when he accuses China of “cheating” the United States.
In exchange for cheap goods, America sends back what Summers calls “printed pieces of paper.” And that, he argues in a recent interview, is a trade the U.S. should gladly take.
“If China wants to sell us things at really low prices and the transaction is we get solar collectors that help reduce climate change, we get batteries for electric cars, and we send them pieces of paper that we print,” Summers said.
“You think that’s a good deal or a bad deal for us? I think it’s a good deal,” he concluded.
Summers also pushed back on the idea that China is a serial trade offender.
“The way you frame the question — that this is cheating and we need to solve the problem of cheating — I think is largely wrong,” he added.
While he acknowledged that U.S.-China trade is more nuanced than his example, Summers said the only serious policy concern is predatory pricing when companies sell below cost to drive out competitors.
If the worry is “total dependence on China,” he said, that might justify some policy response. But “it’s pretty hard to make that case with respect to the vast number of things we’re importing” from around the world.
Investors left holding the bag
Despite economists like Summers calling for calm, the Trump administration isn’t backing off its tariff war.
Trump views China’s nearly $1 trillion trade surplus with the U.S. as a form of exploitation — a key reason he jacked up tariffs on Chinese goods to 145%.
Beijing hit back Friday, raising tariffs on American imports to 125%. The escalating standoff has left investors reeling. Trump 2.0 has officially marked the worst stock market start to a presidency in modern history.
The irony is that Trump had warned of a guaranteed market crash if Kamala Harris won the election.
“You want to see a market crash? If we lost this election, I think the market would go down in tubes,” Trump told supporters in Pennsylvania before the vote.
Still, Wall Street ended the week on a high note. The S&P 500 jumped 1.8% Friday to close at 5,363.36.
But the bond market is flashing warning signs. Yields on 10-year Treasuries surged to 4.5%, topping their September lows, the month the Fed began cutting rates, according to JPMorgan.
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