Former U.S. Treasury Secretary Summers: The probability of a U.S. recession is very close to "50/50," something I couldn't believe a few months ago
Former U.S. Treasury Secretary Lawrence Summers warned that the likelihood of a U.S. economic recession is approaching 50%. He pointed out that expectations were more optimistic a few months ago, but now the risk of recession has significantly increased due to the adverse effects of economic policies. Meanwhile, Trump's economic advisor Hassett holds an optimistic view of the economic outlook, believing that even if the economy declines in the first quarter, it will recover in the second quarter. U.S. stocks have recently performed poorly, with the S&P 500 Index recording its worst single-day performance of 2024
Amid the recent decline of the U.S. stock market, former U.S. Treasury Secretary Lawrence Summers' latest warning has added more pressure to an already tense market sentiment.
On the 11th, Summers posted on social media platform X that the likelihood of the U.S. economy falling into recession is now "close to 50/50." This assessment is significantly more pessimistic than his expectations a few months ago:
A few months ago, I thought the chances of a recession this year were small, and at the beginning of the year, almost no one believed there was a substantial possibility of a recession. But now, while it may still be less than 50/50, it is very close.
He attributed this rising risk to a core issue: “completely counterproductive economic policies.” Summers sharply criticized the trade policies of the Trump administration:
We are falling into the worst of both worlds, with the dual negative impact of tariff policies and their uncertainties on the economy: on one hand, driving up prices and causing inflation; on the other hand, suppressing demand and leading to slower economic growth.
Is the Risk of U.S. Economic Recession Approaching?
On Monday, the U.S. stock market suffered heavy losses, with the S&P 500 index closing down 2.69%, marking its worst single-day performance since December 18, 2024. The Dow Jones Industrial Average fell 2.08%. The Nasdaq dropped 4%. The Nasdaq 100 fell 3.81%, also marking its worst single-day performance since 2022.
The deterioration of risk sentiment is not limited to the U.S. market. International trade tensions are escalating. According to Xinhua News Agency, the government of Ontario, Canada, began imposing a 25% surcharge on electricity exports to three U.S. states on Monday in response to U.S. tariffs against Canada.
In stark contrast to Summers' pessimistic outlook, Trump economic advisor Kevin Hassett appeared quite optimistic during an interview with CNBC on Monday.
He did not acknowledge that the "blame" for a recession should fall on the Trump administration and sought to reassure the market, predicting that even if the economy declines in the first quarter, it will "take off" in the second quarter, citing reasons for economic optimism:
“We need to be very cautious when discussing economic recession. I believe the economy will barely enter positive growth territory in the first quarter, and then, as everyone sees the reality of tax cuts, the economy will begin to take off in the second quarter.”
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