Weekend Long Read: Lawrence Summers and Caixin’s Hu Shuli Discuss U.S.’ Tariff War

Former U.S. Treasury Secretary Lawrence Summers, speaking at the Asia New Vision Forum 2025 in Singapore, emphasized the importance of the U.S. and China mutually understanding each other’s "red lines" and engaging in "strategic reassurance" to manage tensions and minimize the risk of conflict. He stressed this point in an online dialogue with Hu Shuli, publisher of Caixin Media, warning that failure to maintain this understanding—especially amid acts of aggression in areas like cyber, trade, and export controls—could substantially raise conflict risks. Summers advocated for cooperation in critical areas such as climate change and artificial intelligence, and the careful management of growing economic interdependence between the two nations[para. 1][para. 2][para. 3][para. 4].

Summers criticized President Donald Trump’s tariff war, describing tariffs as a "quite unwise" policy. He argued that contrary to claims by the Trump administration, economic theory and evidence clearly show that tariffs increase domestic prices. He expressed concern that tariffs represent an inefficient revenue strategy, disproportionately burden the poor, and risk retaliation from other countries, potentially harming American competitiveness. Summers also noted that while advancements in technology favor increased trade, political and strategic shifts—especially between the U.S. and China—are likely to reduce trade in certain sectors as countries adopt "just-in-case" rather than "just-in-time" practices[para. 5][para. 6][para. 7][para. 8][para. 9][para. 10].

Regarding the U.S. national debt—which has now surpassed $36 trillion—Summers maintained that while there are viable technical and economic solutions, political polarization in the U.S. makes addressing the issue difficult. He suggested that accelerated economic growth, possibly driven by technological advances like AI, could help boost tax revenues and improve the fiscal position, recalling how deficits turned into surpluses in the 1990s through similar mechanisms[para. 11][para. 12][para. 13][para. 14][para. 15].

Summers also addressed inequality in the U.S., emphasizing that enhanced tax enforcement could raise significant revenue. He lamented reductions in tax administration effort and advocated for both addressing tax shelter practices and considering tax rate increases for the wealthiest. For Summers, equity should focus more on raising the lower end rather than pulling down those at the top[para. 28][para. 29][para. 30].

Discussing stablecoins, Summers identified two regulatory priorities: ensuring robust, transparent backing of stablecoins (mainly using short-term government instruments) and preventing their use for anonymous financial activity, which could facilitate money laundering. He doubted that stablecoins would significantly ease U.S. debt financing by creating new demand for treasuries but supported them for their payments and exchange benefits[para. 31][para. 32][para. 33][para. 34][para. 35].

A strong proponent of the independence of the Federal Reserve (Fed), Summers warned against political interference, particularly by President Trump. He argued that attempts to influence monetary policy are likely to backfire, create market anxiety, and potentially increase long-term rates. Summers speculated that much of the pressure on the Fed may be an attempt by the administration to shift blame if the economy underperforms[para. 36][para. 37][para. 38].

On university governance, Summers defended Harvard and similar institutions against excessive government intervention, stating that universities must "resist and reform." He acknowledged areas needing reform, including anti-Semitism, prioritizing truth over advocacy, and upholding high academic standards, but criticized the confrontational stance of the Trump administration as unhelpful[para. 39][para. 40][para. 41][para. 42].

Finally, Summers was optimistic about the transformative potential of AI, foreseeing it driving economic growth, reshaping education with personalized learning, and reducing labor in analytical tasks before physical or interpersonal roles are affected[para. 43][para. 44].