What's happened
Former Treasury Secretary Larry Summers warns of a likely recession, predicting a $5,000 income loss per household and an increase of two million unemployed Americans. This comes as stock markets react to President Trump's tariffs on China, raising concerns among economists and investors alike.
What's behind the headline?
Economic Impact
- Household Income Loss: Summers estimates families could lose $5,000, indicating a significant economic strain.
- Unemployment Surge: An additional two million unemployed would represent a 28% increase from current figures.
Market Reactions
- Volatility: Stock markets have shown extreme volatility, with sharp rises and falls based on tariff news.
- Bank Predictions: Goldman Sachs and JPMorgan have raised recession probabilities to 45% and 60%, respectively, reflecting widespread concern.
Policy Implications
- Tariff Consequences: Summers warns that Trump's tariffs could have a more severe impact than the Smoot-Hawley tariffs of the 1930s, which are often blamed for worsening the Great Depression.
- Global Effects: The repercussions of U.S. tariffs may extend beyond domestic borders, affecting global economies and financial stability.
What the papers say
According to Mike Bedigan in The Independent, Larry Summers stated, "It’s more likely than not that we’re going to have a recession," highlighting the potential for significant household income losses. Similarly, Ariel Zilber from the NY Post noted that Summers warned the tariffs could mirror the Smoot-Hawley tariffs, which deepened the Great Depression. Bloomberg echoed these sentiments, emphasizing the likelihood of increased unemployment and economic distress as a result of current policies.
How we got here
The U.S. economy faces uncertainty due to President Trump's proposed tariffs on China, which have sparked fears of a trade war. Economists are increasingly predicting a recession, with major banks adjusting their forecasts for economic growth and unemployment.
Go deeper
- What are the implications of Trump's tariffs?
- How are markets reacting to these predictions?
- What can families do to prepare for a potential recession?
Common question
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What are the latest US-China trade tensions and their economic impact?
The ongoing trade tensions between the US and China have escalated recently, with both nations imposing significant tariffs on each other's goods. This situation raises important questions about the economic implications for households and global markets. Below, we explore the latest developments and their potential effects.
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What are the signs of a potential recession in the US?
As economic uncertainty looms, many are asking about the signs of a potential recession in the US. With rising tariffs and shifting economic policies, understanding these indicators is crucial for households and investors alike. Below, we explore common questions surrounding recession fears and their implications.
More on these topics
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The United States of America, commonly known as the United States or America, is a country mostly located in central North America, between Canada and Mexico.
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Lawrence Henry Summers is an American economist, former Vice President of Development Economics and Chief Economist of the World Bank, senior U.S.
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The Goldman Sachs Group, Inc., is an American multinational investment bank and financial services company headquartered in New York City.