Former Treasury Secretary Larry Summers issued a stark warning to President Donald Trump, urging the latter to retreat on the taxes, as he did with the tariffs.
What Happened: On Wednesday, in a post on X, Summers said the “country risk trade is back,” citing simultaneous selloffs in U.S. bonds, equities and the dollar as a sign of rising economic fragility.
“A few more days like today and recession will be likely,” Summers says, while adding that the probability of a “financial accident” is also climbing, referring to potential blow-ups in banks, hedge funds, and financial institutions that could cause liquidity to dry up, further exacerbating the crisis.
See Also: Amazon CEO Andy Jassy: No Slowdown In Consumer Spending Amid Tariffs
Summers called on Trump to reconsider his proposed tax agenda, drawing parallels to Trump's recent tariff shift. “President Donald Trump needs to retreat on taxes just as he did on tariffs,” Summers says, referring to his walk-back on the aggressive tariff proposals following political and market backlash in recent weeks.
As U.S. Treasury Yields spiked on Wednesday, with 30-Year Treasuries hitting 5.09%, the highest level since 2023, equity markets witnessed a steep decline, with the Dow Jones Industrial Average down 816.80 points, or 1.91%, the S&P 500 dropping 1.61%, and the Nasdaq Composite index down 1.41%.
The U.S. Dollar Index (DXY) dipped below the 100 level on Wednesday and is currently trading at 99.548, marking its third consecutive day of losses.
Why It Matters: Early this week, Summers warned that the U.S. was at risk of a fiscal crisis similar to the meltdown in the U.K. in 2022, calling it a “Liz Truss moment,” referring to the former British Prime Minister who was ousted soon after the crisis.
“We're on a path towards having an episode like that. I think it will be very costly for our economy, and for the global economy,” he said.
Summers, a Clinton-era Treasury Secretary, said last week that it was Trump who blinked on the tariffs, and despite being a vocal critic of this administration, he lauded the move, saying that “sometimes it’s good to blink.”
Photo Courtesy: Dilok Klaisataporn On Shutterstock.com
Read More:
- Big Beautiful Bill Will ‘Explode The Deficit,’ And Make The Rich Richer: Congressional Budget Office Estimates 4% Income Fall For Lowest Decile Of Americans By 2033
