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Larry Summers: Trump's trade war the "worst self-inflicted wound since WWII"
On a scale of 1-10, how irritated is former Treasury Secretary Larry Summers by the Trump administration's escalating trade war? He's at an 11. On a special edition of GZERO World with Ian Bremmer, Summers says he is highly concerned with the White House's ad hoc and escalating imposition of tariffs, which he describes as the "worst, most consequential, self-inflicted wound in US economic policy since the Second World War." He believes that even if the tariffs are reversed, the US has already lost significant credibility globally, which will have long-term consequences for the country's ability to sell debt, form security alliances, and conduct economic and foreign policy.
Summers, formerly the president of Harvard University, also tells Ian that he's more than a little disappointed by the lack of public pushback from US institutions and business leaders, though he understands the complexities they face in speaking out against the administration. But economics aside, Summers is more worried about the threat to American democracy and the rule of law than the health of the US and global economy. Economic damage can be reversed but erosion of democratic norms is harder to recover from.
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).GZERO World with Ian Bremmer airs on US public television weekly - check local listings.
Who benefits from Trump's tariff wall?
Ian Bremmer's Quick Take: A Quick Take to kick off your week and what a week it is going to be. An extraordinary downturn in US and global markets. The reaction to 'Liberation Day' where American citizens will be liberated from the highest performing economy in the world. Now, globalization, of course, is what is being undone here by the United States. The US benefited massively from globalization, from cheaper goods and services and capital and people moving more easily across borders all over the world. But the fact that the United States economy as a whole benefited did not mean that the average American benefited. They did not. And indeed, while the top 10% did much, much better in the US over the last 40 years, the top 1% even better, the top 0.001%, not only extraordinarily well, world leading well, but also had the money to capture the US political system and ensure that the policies were exactly what they wanted.
And that has led to a massive backlash in the United States where most voters no longer support free trade. Most voters no longer support collective security. Most voters no longer support US leadership on the global stage. They voted in Trump, and Trump is giving them what they voted for, which is a "tariff wall" around the United States that at least for the first few days, he is not backing down. And the implications of that are going to be significant destruction of wealth in the United States and in markets all over the world. And you saw it this morning, Hong Kong, Hang Seng down 13%. Other markets across Asia down 6%, 7& to 10%. The Europeans now following suit, though not quite as dramatic and same in the United States with the opening for the Dow and the Nasdaq. Now, look, I'm not a market watcher. I'm a political scientist.
As a political scientist, what I find very interesting here is this fight between "Deep MAGA" and "Dark MAGA." And Deep MAGA being the people that really do believe that the US has not represented them for a very long time. And what they want is a fair shake from people that are more representative. They want the ability for working and middle class to have better lives and not be taken advantage of. They want non-predatory policy domestically. Dark MAGA, globalism, free trade, and capturing the policies of a smaller state that do their bidding. And this last weekend has been a repudiation, at least tactically of Dark maga by Deep MAGA. This was the fight you saw between Elon Musk and who runs DOGE, and this happens to be the richest man in the world and the second most powerful heretofore in the Trump administration. And Peter Navarro, who is trade and manufacturing counselor for the White House and nowhere near as powerful as Elon, and yet told Elon to stay in his lane, said, "You're interested in selling cars, and what we are doing is making America great again."
Navarro's not in a fight with Elon to be clear. Navarro is supporting a policy that he knows Trump wants. And so Trump has decided that on this one, which is the most impactful policy he's put in place globally in this or in his previous administration, that he is decisively going against the globalists and he's going in favor of using American power to have manufacturing and capital in the US. Now, nevermind the fact that this is going to take a long time. That if it were to work, and if it were to work, you'd want it to be consistent. You'd want to build up American reputational capital. You'd want rule of law to be strong. You'd want people to think that they could come to US universities and prosper, that the US would be the most attractive place to send their kids to have jobs, and Trump isn't doing any of those things, so that's a problem, right?
The fact that the US is making itself less attractive as a destination and less predictable as a destination really undermines US putting massive tariffs on highest you've seen in over a hundred years to make other countries pay. But politically, what Trump could benefit from doing here is actually leaning in against the globalists. In other words, if he were to say, "Yes, this hit to the markets is a feature, it's not a bug. Portfolios, they're going to get hit. And the rich people that have benefited on the backs of the average Americans, I don't care if they don't make a lot of money. Just like the foreign governments that have been taking advantage of American free trade policy," which is overstated. But nonetheless, the politically smart thing for Trump to do domestically would be to then say, "I'm going to snap back the tax breaks that I gave to the highest bracket.
You guys are going to start paying again, and I'm going to take the money from the tariffs. Take these effectively a sales tax, all the money that the US government will be collecting from these higher goods, and I'm going to redistribute it to the average American. I'm going to give that money to the workers so that they can deal with the fact that their pensions have just blown up by 10%, by 20% or more over the coming weeks. I'm going to give them an opportunity because they're going to have to pay higher prices in a more inflationary environment where you can't actually substitute away from imports because all goods are so interconnected, whether it's automotive or it's a plane ticket or it's just a cup of coffee at your local Starbucks."
All of those things, Trump has the opportunity to lean in to the Republican base, which is also a lot of the former progressive base among Democrats who they have lost, in part because they have moved away from policies that have very popular under Trump in firming up the border against illegal immigrants, and also in opposing overly progressive woke policies that are very unpopular across the United States. Having said that, I don't think that's what he's going to do. And the reason for it is because I think that ultimately Trump is more interested in kleptocracy than he is in taking power for himself. I think he's much more transactional. He's much easier to buy off as an individual. If you give him money, he will give you the policies he wants. He's not going to throw Elon away.
Elon's already given over $250 million to the campaign, and we'll give a lot more and we'll find ways to benefit Trump and his family. A lot of people like that, that want lower taxes for the rich. A lot of people like that, that want lower regulations that allow their companies to benefit more, that ultimately screw the average person in the United States. And I think Trump is more interested in that. If you really wanted to ensure that you could benefit the poor people, you wouldn't be taking away so many of the capacities of the IRS for example. You'd want audits on wealthy people instead of wealthy people being able to avoid taxes because the IRS doesn't even have the capacity to do the most complicated audits out there.
You would have a group of policies that would be much more focused towards ensuring that the wealthy actually pay their fair share, that legal and tax policies are not buyable by special interests, and ultimately that the swamp could be drained. And that just, even though I think that's where JD Vance is more oriented, and I think that's where increasingly house Republicans are more oriented. Lord knows that's the Republican base, which today are less educated men, working class and middle class. The Democrats have lost almost all those voters, but that's not where Trump is. And I think as a consequence, the political opportunity that he has will be constrained.
That ultimately also means that there'll be more of a balance and probably more of a snap back eventually in reducing these tariffs and finding deals earlier than you would otherwise expect. So maybe the market hit long-term is not as bad as it could be in a full-on anti-globalist push by the Trump administration. But ultimately, one thing we've learned by Trump, who again used to be a Democrat before he was Republican, he's fundamentally not ideological. He's fundamentally about Trump. And here navigating that probably means less pain as opposed to more. Even though in the near term today, this week, there's going to be plenty of carnage in the United States and around the world. That's it for me, and I'll talk to you all real soon.
Why cutting USAID will hurt American foreign policy
Ian's Quick Take: Hi everybody. Ian Bremmer here and a Quick Take for today on USAID, the US Agency for International Development, which is in the process of being shut down. Nearly all Washington staff have been put on leave, they're closing missions abroad, the State Department moving to evacuate all staff around the world. Why should we care? Does this matter? This agency was set up back over 50 years ago, 1961, by then President John F. Kennedy, and it was meant to coordinate the distribution of foreign aid for the United States all over the world and differentiate that from military support that was provided by the United States.
Secretary of State Marco Rubio has said that the US isn't providing charity, that's not what foreign aid is, that it should be providing support for US national interests. And I agree that it should be providing support for US national interest, but it is important to recognize that actually when USAID was set up, it was set up in part as charity, that President Kennedy's position was that the United States had a moral obligation to support poorer people, and poorer countries around the world. They are fellow human beings, after all, and the United States has historically benefited massively from developing resources all around the world, and frequently, the people that lived in those countries didn't get very much as a consequence, and the US has benefited massively, as have other wealthy countries, from industrialization, and putting carbon into the atmosphere that now poor countries can't do because of climate change, and we're saying, "We need to transition," but the US, of course, has gotten the benefits of that historically.
You know, my view is, I'm okay with charity. I actually think that helping save lives with food and medicine for millions of people and especially babies and children. I mean, even if it did nothing for the United States directly, I would be okay with spending some of the money of American taxpayers on that, especially as opposed to say a war in Afghanistan or the latest sort of bomber program that is expensive and more than the Americans need. So, I push back on the US should never do charity argument. But leaving that aside, you don't need that argument to focus on the importance of USAID.
And I want to, before I get into the national interest side, I do want to say I am empathetic with why it is unpopular. Because at a moment when so many average Americans feel like the US government has not taken care of them, and this is why you see so much backlash against all of the illegal immigrants that have not been addressed by administrations for many years, and why there's so much backlash against the US establishment, whether it's Democrat or Republican, in saying, "What about the average working American? What about our healthcare? What about our public school system? What about things that you should care a lot more about than sending aid to brown people around the world?" Which is essentially what USAID is mostly doing. I get that. And in that regard, it's an easy target for Trump. It's a particularly easy target for Elon Musk. I would ask first, "Why tax cuts for and regulations written by billionaires in the United States before poor people and Americans?" That would be my higher priority if I was really, really angry and antagonized by how badly money is being spent in the US. But that's a different story.
The point is you don't need to make the argument of charity. It is very clear that US foreign aid supports America's economic and national security interests. It is growing markets for consumers, for American businesses and products all over the world. The US has the biggest businesses. It has the biggest market. It benefits the most from other countries around the world having more capacity to sustainably consume and engage with those businesses. America benefits in having more health security by containing disease and pandemics because those diseases and pandemics don't suddenly stop at the American border. The US benefits from aid that reduces insurgencies creating instability that leads to more illegal migration all over the world, many of whom ultimately end up in the United States. It creates more economic opportunity and safety and security in origin countries. And that is a carrot that matters. It's not just about sticks. It's a carrot for economic statecraft that gives the Americans more influence as opposed to say the Russians, or more importantly the Chinese.
Because getting rid of USAID and cutting back on all these programs creates a vacuum. And that is an opportunity for adversaries. I've already seen ministers from large African countries who have their American programs getting cut off, reaching out immediately to their counterparts, ministers in China saying, "Are you willing to send in the programs to replace the Americans that are leaving?" And China doesn't have the economic wherewithal, the Americans do, but they certainly will seize opportunities that are economically useful to them, long-term, because they have a much longer-term perspective on these things than a US administration that's gone in four years. So I worry about that.
I think that USAID has been America's principle interlocutor with civil society in developing countries. And to the extent that we care about those countries having systems that are more aligned with the values and standards that the United States has historically promoted, then you don't want to undermine that and allow the Chinese to come in, which has very little interest in civil society, indifferent to civil society. It's a source of intelligence for the United States. And we've seen that even if it's sometimes uncomfortable for the local governments who aren't necessarily in favor of that. It is true that all USAID projects are probably not going to ultimately be killed, that the State Department is going to take it over and Marco Rubio has said that, "There's a lot of corruption in USAID, and a lot of this money is misspent, and is spent badly, and breaks executive orders," and I am sure that is true, and I am sure that that corruption needs to be addressed. It wouldn't surprise me. The US is an incredibly bloated government system. But shooting first and asking questions later tends to kill innocencts. And that is of course the approach here. And the reality is, that Elon and Trump and their ability to act and be destructive is much greater than the damage control that the secretary of state can do at this moment. And the State Department just does not have the people or the infrastructure to execute on a lot of these programs once USAID is shut down.
And the message that this is really sending to allies is that the United States is an unreliable partner. You cannot count on it. That what they say to you in one administration is not going to be consistent in a second administration, in a way that is not true with other countries, most other countries, around the world. And so I continue to believe, as I did before Trump was inaugurated, that the US is going to see a lot of wins. A lot of countries are going to bend to his will because he's more powerful and he's willing to use that power directly. But that does not mean that the United States will long-term succeed in a law of the jungle approach, an approach which is all stick and no carrot, even when the stick is very, very big, but you can't wield it effectively for a long period of time. And other countries are learning that carrots are kind of smart. I mean, the Chinese originally perfected the all stick and no carrot approach and then saw that the United States was more effective in a lot of countries because they also had economic statecraft. They also had these commercial levers, and so the Chinese started saying, "Oh, we need to figure out how to deliver aid to a lot of these countries, doesn't have to be transparent, can work right with the governments, but ultimately that's going to give us more influence in these countries." And that is something that President Trump and his administration in the early weeks at least seemed to be jettisoning.
So I think this is Pennywise pound foolish. I think it is short-term beneficial to Trump and will look like a win for him and his base and long-term will undermine US power around the world and will of course make the world a less stable place. So on balance, I think this is a problem. It's not something that I think is going to go well. I would love to be proven wrong. I'll be watching it carefully and I think it's a good thing to be debating.
So that's it for me, and I'll talk to you all real soon.
How Biden’s presidency will be remembered
Jon Lieber, Eurasia Group's head of research and managing director for the firm's coverage of United States political and policy developments, shares his perspective on US politics from Washington, DC.
This is what we're watching in US Politics this week: One question that's going to be debated for a long time in the coming years is what is President Biden's legacy? I think there are a couple of things that he's going to be remembered for.
The first is the extraordinarily chaotic global environment over which he presided. Republicans will tie this back to the shambolic withdrawal from Afghanistan that President Biden presided over. But following that, you had the Russian invasion in Ukraine and the events of October 7th in the Middle East that led to the ongoing war there that is just now starting to look like it's settling down. But this is clearly going to be one of the background themes of any assessments of President Biden's legacy.
Biden's now one of four one-term presidents in the last 50 years, and one of the reasons that he lost was of course inflation. And inflation, you could argue was fueled by the pandemic or you could argue it was fueled by early actions taken by the Biden administration to spend a lot of money, perhaps more money than was necessary. But either way, the inflationary story of 2021 and 2022 is going to be remembered as one of his key legacies and one of the reasons that he lost reelection. Now that loss to Donald Trump, allowing probably one of the more controversial presidents in certainly recent American history, to come back into office and mount an unprecedented political comeback is also going to be part of Biden's legacy. Because of the fact that he decided that he was able to run even at his advanced age, that blocked out the Democrats from having an opportunity to hold a primary and then forced the Democrats to change horses midstream and move over to Kamala Harris in the middle of the election cycle, who of course lost to Trump. That is also going to be part of his legacy.
And it's unclear. Biden thinks, says it publicly, he could have won election if he just stayed in. He's 82 years old. He'd be the oldest president ever if he did, and there's obvious decline in his faculties over the course of the year. But more importantly, the American people really started to lose confidence in Biden as time went on this year. So not at all clear that he would've won that election or that any other Democrat could have won that election if there were a primary process. But his sticking around and the White House staff and other Democratic operatives that covered for the age-related decline that he was experiencing is also going to be a part of President Biden's election.
Probably one of the more consequential things I think he's going to end up having done over the longer term is increasing the US confrontation with China, particularly over technology policy. The world is at a critical juncture when it comes to the advanced semiconductors and artificial intelligence. And the wall that the Biden administration has been trying to erect around Chinese access to US advanced technologies is going to have ripple effects and repercussions for years to come. The Trump administration's likely to continue a lot of that, and this could potentially be an inflection point in 10 years time as we look back and look at the two different tech ecosystems that are being built out. A lot of that legacy is going to trace back to the Biden administration.
So that's a pretty complex, mixed legacy. The US doesn't have lot of one-term presidents in recent history. Most one-term presidents aren't remembered that fondly. Presidents like George H.W. Bush look a lot better in the long distance of history, whereas President Jimmy Carter who recently passed away still has a bit of a mixed legacy. And that's probably where Biden's going to end up.
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Will Trumponomics cause a slowdown for the US economy?
Donald Trump’s economic agenda blends deregulation, anti-immigration policies, higher tariffs, and loose fiscal policy—an approach that "cuts in multiple different directions," says Jon Lieber during a GZERO livestream to discuss the 2025 Top Risks report. Lieber says deregulation could boost productivity, while measures like deportations and trade barriers risk straining industries reliant on foreign labor and open markets. With markets pricing in optimism but key sectors facing uncertainty, the impact of Trumponomics will hinge on how far the administration goes in implementing its campaign promises in 2025 and beyond.
Take a deep dive with the panel in our full discussion, livestreamed on Jan. 6 here.
Can Trump's tariff plan boost the US economy?
President-elect Donald Trump has made no secret of his love of tariffs, vowing steep import taxes on China, Mexico, Canada, and almost every product that crosses the US border on his first day in office. Will they boost US jobs and manufacturing, as Trump promises, or lead to rising inflation, as many economists warn? On GZERO World, Oren Cass, founder and chief economist at conservative think tank American Compass, joins Ian Bremmer for an in-depth discussion about Trump’s tariff plan and the future of US-China trade policy. Cass believes that tariffs are a way to level the playing field with China, which he says “flouts international rules and any concept of a free market.” He says tariffs can help correct global trade imbalances and doesn’t believe they’ll lead to a dramatic spike in consumer prices.
“When you raise money through a tariff, you don’t set that money on fire. It’s also tax revenue,” Cass explains, “We have a $2 trillion deficit. If I told you that there was some other tax that was going to help reduce the deficit, you’d probably say that would help reign inflation in.”
Watch full episode: The case for Trump's tariffs
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).
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The case for Trump's tariffs
What will President-Elect Donald Trump’s election win mean for the US economy? After years of inflation and stagnating wage growth, millions of voters elected Trump off the back of his promise to usher in a “golden age of America.” Trump has vowed to raise tariffs, slash business regulation, and deport millions of undocumented immigrants, policies he says will put Americans first. But what will that mean practically for workers and consumers? On GZERO World, Ian Bremmer is joined by Oren Cass, the founder and chief economist of the conservative think tank American Compass, who thinks Trump’s tariff plan will be a step in the right direction. Many economists argue that Trump's tariff plans will raise consumer prices and spark a global trade war, but Cass argues they're a necessary correction that will incentivize domestic manufacturing, reduce the deficit, and counter China’s unfair trade practices.
“If you actually believe that making things in America matters, then we are going to have to find a way to put a thumb on the scale for getting more of that investment back here,” Cass explains, “And I think that's what a tariff can help do.”
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).
What Donald Trump's second term will mean for the US economy
Listen: Donald Trump has promised to fix what he calls a broken economy and usher in a “golden age of America.” He’s vowed to implement record tariffs, slash regulation, and deport millions of undocumented immigrants. But what will that mean practically for America’s economic future? On the GZERO World Podcast, Ian Bremmer is joined by Oren Cass, founder and chief economist at the conservative think tank American Compass, to discuss Trump’s economic agenda and why Cass believes it will help American workers and businesses in the long run. Mass deportations, he says, will lead to a tighter labor market that will force employers to raise wages and increase working conditions. He also argues that steep tariffs are the only way to level the playing field with China, which has “flouted any concept of a free market or fair trade” for decades. However, many economists warn that Trump’s plan will lead to rising inflation and a global trade war. So what’s the biggest argument for an America first economic agenda? Will it really lead to long-term benefits for workers? Oren Cass makes his case.
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.
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