- On Jan. 1, no one thought there was a chance of a recession, former Treasury Secretary Larry Summers said, but that’s changed in the midst of all the policy uncertainty, namely ever-changing tariffs. He sees the recession risk near 50%.
President Donald Trump’s fluctuating tariff policy has throttled the stock market and stoked recession fears—so much so that Goldman Sachs’chief economist on Tuesday downgraded the entire U.S. economy. And former Treasury Secretary Larry Summers is chiming in.
In an interview with CNN on Monday, Summers said there is a “real possibility” of a recession, something he would not have suspected a couple months ago. He blamed “counterproductive” economic policies, mainly tariffs. Summers said he doesn’t think any economist would recommend on-again, off-again tariffs.
The current administration’s emphasis on tariffs has chilled demand, but fueled fear spending, Summers explained. Basically, businesses and people are investing less. But on the other hand, some are purchasing supplies in fear that they either won’t be able to later on, or would have to pay taxes on them. It’s the worst of both worlds, Summers said. “This is pretty much a self-inflicted wound,” he said.
He continued: “On January 1, no one thought that a recession was a substantial likelihood, and today, market prices and consensus opinions of economists suggest a very real risk of recession.”
On Tuesday, Summers appeared in another interview, this time with Bloomberg TV, Summers said when Trump was inaugurated, many expected a strong economy and with a strong undercurrent of American exceptionalism. But there’s been a sea change because of all the uncertainty, and now he sees a recession chance near 50%.
It isn’t only the stock market—which saw shares tumble again on Tuesday after it had its worst day of the year on Monday—or Wall Street, or distraught analysts. Chief executives are more pessimistic about the economy than they have been since the pandemic.
Trump did not rule out a recession in a recent interview. He instead said there would be a “period of transition.” Treasury Secretary Scott Bessent had also said there would be a “detox period” for the economy that Trump inherited. Summers appeared to call their bluff in his interview with CNN, pointing to the time not long ago when people were calling inflation transitory.
“That didn’t work out very well as a policy idea, and I don’t think this is going to work out very well,” Summers said, later adding: “I’m pretty worried about the whole situation.”
Summers did not respond to Fortune’s request for comment. The White House referred Fortune to Press Secretary Karoline Leavitt’s briefing on Tuesday, where she defended tariffs and echoed the president in claiming the economy is in a period of transition.