Economist Larry Summers, whose warnings to Democrats about the risks of inflation during President Joe Biden's term proved prescient, is now warning that something even worse could be coming thanks to President Donald Trump's global trade war.
Writing on X, Summers warned that the trade war sparked by Trump has led to developments that "suggest we may be headed for serious financial crisis wholly induced by US government tariff policy."
Summers then went on to explain why he says that patterns in the bond market were particularly disturbing.
"Long-term interest rates are gapping up, even as the stock market moves sharply downwards," he wrote. "This highly unusual pattern suggests a generalized aversion to US assets in global financial markets. We are being treated by global financial markets like a problematic emerging market."
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The impact of this, Summers added, could be severe.
"This could set off all kinds of vicious spirals, given government debts and deficits and dependence on foreign purchasers," he argued. "The only way to mitigate these risks is for the President Donald Trump to back off his current path. This is the first US bout of US financial instability caused by the US government."