Larry Summers says Trump policies are ‘scarily’ like Perón's

Former US Treasury secretary Lawrence Summers warned that US President Donald Trump’s policies risk putting the US on a similar path to that of post-war Argentina, which descended from being a relatively advanced developed nation into an economic laggard.

“Argentina went completely off track because of decisions made in a few years by an elected — through a democracy — leader who pursued autocracy rather than venerating democracy,” Summers said on Bloomberg Television’s Wall Street Week with David Westin. “And that should be a cautionary tale for everyone in the business community and everyone involved in our political process.”

The late Juan Perón founded a populist movement in 1946 at a time when Argentina was grouped by some observers with the likes of Canada, Australia and New Zealand as a sophisticated economy with abundant natural resources. Peronism championed import substitution and high tariffs in an effort to stoke Argentina’s domestic industry. Trade protectionism was “the key policy” leading to its economic downfall, according to a 2023 assessment published by the think tank OMFIF.

“Over time, as the nationalism took hold, as economic success became more and more about who is friends with the government – and less and less about who was really good at producing products and competing with foreigners – Argentina’s economic performance became calamitous,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “It’s a model that, if you think about it, is scarily reminiscent of what we are doing right now.”

Summers highlighted that the US does have “highly resilient institutions” and strengths such that Argentina didn’t have when Perón came to office. But he drew parallels with the South American nation’s authoritarian past including protectionism, “a cult of personality around the leader” and attacks on parts of civil society such as media outlets, universities and law firms.

The autocratic experiences of post-war Argentina, along with a number of European nations after World War I “are very cautionary lessons that I think Americans need to pay more attention to and frankly, need to be more widely discussed,” Summers said.

Trump and his cabinet chiefs have argued that the steep tariffs he’s threatened have given Washington leverage with trading partners, and that deals with some nations will provide a major opportunity for the US to expand its exports. They have also hailed pledges for major investment projects from a slew of other countries and companies, totalling trillions of dollars.

China as winner

Summers expressed scepticism about some of those promises.

“You don’t know what they mean, because you don’t know what the baseline would have been,” he said.

The former US Treasury secretary also cautioned that there’s going to be “a lot of investment that goes out – because we’re making ourselves such a more problematic hub for production when we’re raising the price of all the inputs.”

Trump has imposed or planned tariffs on a number of products used in making manufactured goods, such as steel, aluminum, semiconductors and copper.

“I suspect the consequence of some of this may well be a manufacturing sector that is both quantitatively smaller and qualitatively inferior,” he said.

More broadly, Summers said “we are alienating the rest of the world” with protectionist and nationalist policies. “Higher priced inputs, much more uncertainty for investors and alienating of customers can’t be the right strategy,” he said.

“There’s a winner here – there really is a winner here in the strategy that we are pursuing. His name is Xi Jinping,” Summers said, referring to China’s president.