President Donald Trump‘s tariff threats appear to be doing more harm than good to the United States, former Treasury Secretary and Obama administration economic advisor Larry Summers told CNBC Friday.
“This is a policy that’s in the ‘Stop, or I’ll shoot myself in the foot’ category,” he said on “Power Lunch.”
“This is the first time when we’ve started making threats that seem to be boomeranging against our own economy. The stock market suggests they’re boomeranging against our own economy, the CEOs of major U.S. manufacturing say they’re boomeranging against the U.S. economy,” added Summers, who ran Treasury during Bill Clinton’s presidency and was director of the National Economic Council under former President Barack Obama.
The escalating trade conflict between the U.S. and China is causing fear among investors about a possible trade war. Stocks fell sharply on Friday, with the Dow Jones industrial average closing down more than 550 points.
Trump’s latest action came Thursday, when he threatened additional tariffs on $100 billion of China goods. China has promised to “immediately fight back with a major response.”
Summers agrees there are “real problems” with China and more needs to be done to address issues such as China’s intellectual property theft. However, he noted that the Europeans, Japanese and others also have the same issue.
“The right way to take those problems on is together with other nations, not in a way that is so truculent, so inconsistent with international norms that we drive the rest of the world to siding with China, which has been the effect of the approach that has been taken here,” he said.
He also said it shouldn’t be done in a way that “damages the interests of more American firms than are helped.”
Alan Tonelson, founder of the public policy blog RealityChek, said while he’d like to see the U.S. work with other nations, he called it “the trade policy equivalent of the unicorn.”
That’s because the U.S.’ major trading partners have cut their own deals with China and many directly or indirectly helped China divert a flood of steel into the U.S., he said on “Closing Bell.”
“We have no trade allies,” said Tonelson.
Meanwhile, the stock market action isn’t helping the U.S.’ case, Summers argued.
“When every time we make a threat our own stock market collapses, it kind of seems unlikely that’s going to be a lot of leverage against the Chinese.”
Earlier Friday, Treasury Secretary Steve Mnuchin told “Power Lunch” the Trump administration is prepared for the chance the trade dispute with China escalates.
“Our objective is still not to be in a trade war with [China],” he said. “I’m cautiously optimistic that we will be able to work this out … There is the potential of a trade war.”
— CNBC’s Tae Kim contributed to this report.