The Trump inflation shock could be worse than the last inflation crisis, Larry Summers warns

An influential economist has advised the President-elect against fulfilling certain campaign promises, citing potential inflation concerns. The economist is particularly worried about the effects of proposed tax cuts, increased tariffs, deportation of undocumented workers, and attempts to sway the Federal Reserve's policies. These actions, he argues, could lead to an inflation shock more severe than the one experienced in 2021.

During 2021, consumer prices spiked rapidly, reaching a 40-year peak in mid-2022. Though inflation rates have reduced, the elevated price levels persist, contributing to frustrations over living costs that impacted political outcomes. It remains uncertain how the President-elect will implement his economic strategies or if any moderation will occur.

The transition team disputes these inflation warnings, attributing past policies to job creation and economic boosts without causing inflation. A hedge fund executive associated with the incoming administration also dismissed inflation worries, suggesting a focus on improving American economic conditions.

Economists, however, caution that the new agenda might rekindle inflation. A survey indicated a majority belief that prices could rise under the new administration. The economist concerned about inflation previously linked past inflation to large economic stimulus measures, supply chain issues, and geopolitical events, drawing parallels to the current situation.

The economist fears the proposed program, involving central bank criticism, tariff hikes, deportations, and budget deficits, is highly inflationary—an opinion widely shared among economic experts.