Dollar Faces Biggest Threat in Decades From ‘Scary’ Moves, Summers Says

(Bloomberg) — Former Treasury Secretary Lawrence Summers said that volatile policy actions and rhetoric from President Donald Trump are posing the biggest risk to the dollar’s dominance in the world economy in half a century.

“The broad approach we are taking to the rest of the world represents the biggest threat to the US dollar’s role as the central currency in the world economy we have had in the last five decades,” Summers said in an interview on Bloomberg Television Wednesday.

Trump has jacked up tariffs on Mexico, Canada and China in recent weeks, and is planning a raft of further measures in the coming weeks and months. The Trump administration says the moves will rebalance trade flows, boost domestic manufacturing, increase federal revenues and combat an influx of illegal drugs.

Summers pointed to the selloff in US stocks earlier this week as an illustration of investor concern about the direction of US policy. He also criticized the DOGE-led efficiency drive to shrink government spending, saying that measures including cutting the ranks of IRS tax inspectors will damage revenue-raising efforts.

“It would be premature to say on the basis of anything that happened in a few days or even a few weeks that it was the end of US exceptionalism” as the top economy in the world, said Summers, a Harvard University professor and paid contributor to Bloomberg TV.

He also said that Trump and his campaign last year “identified some important directions in which this economy could be made better,” such as reducing certain regulations and addressing areas where the US had been taken advantage of in trade. But “the way we are going about it is something that seems very scary to me.”

“If I were still sitting at the Treasury Department, I would be terrified about the consequences of the kind of rhetoric the president is engaging in vis-a-vis other countries,” he said. “I would be alarmed by the way in which China and Europe were being magnets for capital as people rushed out of dollars.”

Summers didn’t specify the rhetoric to which he was referring. Trump last week engaged in a major blow-up with Ukrainian President Volodymyr Zelenskiy.

The president also has called for Canada to become part of the US and for Denmark to hand control of Greenland to Washington. His cabinet members have blasted European nations for how they handle their domestic politics, and over their relatively limited defense capacity.

Summers suggested Europe and China are “increasingly aligning with each other because they had both been alienated from us.”

Given the US federal government’s borrowing needs, “I would be hugely alarmed about the role of the dollar” amid presidential criticism of countries that have traditionally been buyers of US Treasuries, he said.

–With assistance from Kailey Leinz and Joe Mathieu.

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