Former Treasury Secretary Larry Summers urged the Biden administration on Sunday to ease tariffs on China to bring down costs and curb rising inflation.
And he predicted a recession would “more likely than not” occur within the next two years.
Summers told host Dana Bash on CNN’s “State of the Union” that he disagrees with Treasury Secretary Janet Yellen, who last week said there is “nothing to suggest that a recession is in the works.”
“I think when inflation is as high as it is right now, and unemployment is as low as it is right now, it’s almost always been followed within two years by recession,” Summers said. “I think they’re wrong now if anyone’s highly confident that we’re going to avoid recession.”
U.S. inflation hit a four-decade high in May, surging to 8.6 percent. Over the weekend, gas prices hit a national average of $5, up about 60 cents from a month ago and two dollars from a year ago.
The Federal Reserve has also indicated it doesn’t necessarily see a recession on the horizon. In May, Fed Chair Jerome Powell said there is a “good chance to restore price stability without a recession, without a severe downturn, without materially higher unemployment.”
Summers said there is a risk prices will continue to climb and called the central bank’s forecast that inflation will cool “much too optimistic.” The Fed is set to meet again later this week.
Summers acknowledged there is not much the Biden administration can do to bring down gas prices, but said inflation can be reduced by cutting tariffs and passing bipartisan legislation that would raise Trump-era tax cuts, impose taxes on corporations and take down prescription drug prices.
“We should focus on what’s important, not raising input prices for American producers, so they’re less competitive, which is what much of those tariffs do,” Summers told Bash. “I have advocated that we need a much more strategic tariff policy vis-a-vis China that takes tariffs down and therefore takes prices down for American consumers and for producers.”
Even though rolling back the tariffs on China imposed by former President Donald Trump has been seen as a way to potentially tone down inflation, the Biden administration has not yet acted.
At a press conference last month, President Joe Biden noted that tariffs on imports from China “were imposed by the last administration” and said he was considering lifting them. Yellen has also advocated for lifting some of the tariffs, cautioning that the levies have a negative impact on the U.S. consumers and businesses.
