Larry Summers slammed Treasury Secretary Scott Bessent for making “ludicrous” claims that Chinese producers will bear the brunt of President Trump’s tariffs.
Summers, who served as Treasury secretary under President Bill Clinton and director of the National Economic Council under President Barack Obama, took issue with Bessent, who has said prices will not spike for US consumers.
Bessent “keeps asserting that Chinese producers will bear the cost of new tariffs. This position is contradicted by every introductory economics textbook and course of which I am aware,” Summers wrote in a post on X on Sunday.
“What is the argument or authority for a claim that seems ludicrous?” he continued.
Summers noted that steel prices, for example, have already started to rise as manufacturers anticipate the impact of the tariffs.
“The Bessent theory is contradicted by the observation that US steel prices have risen by about 1/3 in the two months since Inauguration Day adding several hundred dollars to the price of new cars,” he wrote.
Hot-rolled coil steel prices hit $1,044 per metric ton last week — a 38% jump from just before Trump’s election win, according to the CRU Steel Sheet Monitor.
Summers also argued that if Bessent’s theory is correct, and there will be no price impact for consumers of Chinese-made products, “there would be little incentive for consumers to switch away from Chinese producers.”
Most of the United States’ imports from China — including clothes, toys, shoes and steel — can be made here, or imported from other countries, a White House official told The Post in a statement.
“We have the leverage over Chinese producers, and that’s exactly why we raised billions in revenue from the China tariffs during President Trump’s first term without triggering systemic inflation,” the official continued.
Trump’s tariffs this time around — including his levy on China, proposed taxes on Canada and Mexico and reciprocal tariffs — are more widespread than his first-term tariffs, and come as global economies are still recovering from the lingering effects of the pandemic.
The Treasury Department did not immediately respond to The Post’s request for comment.
Trump imposed 25% tariffs on steel and aluminum imports in March. But prices had already jumped 20% by late February since his inauguration as manufacturers feared the potential price impact.
Trump’s stiff 20% levy on China — and his 25% tariffs on Canada and Mexico, which are on a 30-day pause set to end April 2 — have spooked investors as economists have warned the taxes could reheat inflation.
Markets erased their post-election gains and the “Magnificent 7” tech stocks saw massive losses this year.
But Bessent told Fox News earlier this month that he is “highly confident that the Chinese manufacturers will eat the tariffs — prices won’t go up.”
“With Canada and Mexico, I think we’re in the middle of a transition,” he added.
Later that week, he pushed back against the idea that Trump’s tariffs would continue to fuel inflation.
“Tariffs are a one-time price adjustment,” Bessent told CNBC’s “Squawk Box.”
Meanwhile, Wall Street roared back to life on Monday after the Trump administration signaled it might take a more narrow approach to imposing tariffs.
The president is likely to exclude a set of sector-specific tariffs while applying reciprocal levies on April 2, what he’s calling “Liberation Day,” according to Bloomberg and the Wall Street Journal.
“I may give a lot of countries breaks,” Trump told reporters Monday in the Oval Office.
However, also on Monday, he said he would announce in the very near future tariffs on automobiles, aluminum and pharmaceuticals.
Credit: Source link
