Former Treasury Secretary and economist Lawrence Summers is sounding the alarm over Donald Trump’s proposed new tax policies.

In his recent appearance on Bloomberg, Summers criticized Trump’s plan to replace income tax revenues with tariffs, predicting it would raise consumer prices and cause economic stagnation.

“This is a prescription for the mother of all stagflations,” he said.

Summers also voiced concerns about Trump’s negative views toward the Fed and his restrictive immigration policies, which he believes are an “irresponsible set of proposals.”

Tariffs under Trump could cause "economic warfare"

In discussions with House Republicans, Trump has suggested using tariff hikes to offset income tax cuts and proposed a universal 10% import levy and higher tariffs on Chinese goods.

Summers argues that shifting from income taxes to tariffs would significantly elevate consumer costs. Tariffs are an import tax, which businesses often pass on to consumers, leading to higher prices and reduced purchasing power.

This scenario risks inducing stagflation, where inflation rises but economic growth remains sluggish.

“I don’t think there’s been a more inflationary presidential economic policy platform in my lifetime,” said Summers, who, while a lifelong Democrat, has also not been afraid to go after the Biden administration.

He criticized Biden for his pandemic stimulus package as unnecessarily inflationary.

Summers also pointed to Trump’s anti-immigration stance as problematic, saying it would lead to “more wage inflation pressures” by tightening the labor supply.

Trump's policies could bring mortgage rates as high as 10%

Sources familiar with the matter reported that Trump is planning to restructure the Federal Reserve system as we know it.

Summers cautioned that Trump’s pressure could push mortgage rates to levels we haven’t seen in a long time, with the Fed potentially keeping high rates to make itself relevant.

“This could easily be a prescription for a 10% mortgage rate—something I experienced when I bought my first house but didn’t expect to see again in the U.S.,” he said, calling it “really dangerous stuff.”

Summers did acknowledge politicians don’t always make good on their promises, which appears to be “a feature of candidate Trump.”

This isn’t the first time Summers has expressed serious concerns about Trump’s economic agenda. Just last week, Summers issued similar warnings to the Economic Club of New York, emphasizing the potential dangers of Trump’s proposed policies.

The Peterson Institute for International Economics has also scrutinized Trump's plans. It argues that the presidential nominee is "misguided" in thinking that tariffs mainly disadvantage foreigners.

Trump’s team responds to Summers’ remarks

Karoline Leavitt, a Trump campaign spokesperson, dismissed Summers’ concerns, arguing that Trump's policies are designed to protect American jobs and stimulate economic growth.

“President Trump’s first-term pro-growth economic policies created record-low mortgage, interest, and unemployment rates and made inflation virtually non-existent,” said Leavitt.

“Americans can expect President Trump’s second-term economic agenda will have the same impact and end Joe Biden’s inflation crisis.”