Summers: The president is certainly not right in the way he is doing it. There is not much in the historical records to suggest that these kinds of bluster and threats will be effective. It is an extraordinarily negative achievement of our economic diplomacy that we have our traditional allies being more sympathetic to China than to us because we are sanctioning them.
DER SPIEGEL: China holds U.S. treasury bills, notes and bonds that are worth more than a trillion dollars. Is that a weapon Beijing will use for retaliatory measures?
Summers: Never say never. But taking steps that would drive the value of the dollar down would be enormously costly for the Chinese, given their large external position in dollar assets. The result would be perhaps a more competitive dollar relative to the euro, which many in the U.S. would see as an advantage. Therefore, I do not expect China to sell dollar assets as a source of leverage. [...]
Summers: Many corporations in America are appalled by some aspects of the administration's policy. It is quite extraordinary for CEOs like Jamie Dimon of JPMorgan or Satya Nadella of Microsoft to speak out with respect to our migration policy. The president lacks a reservoir of credibility with major business leaders. President Trump's business advisory council had to disband because of the resignation of CEOs. It is unprecedented. Business leaders fear that this blundering approach will lead to retaliation against them and favoritism by China toward its European and Japanese competitors. And no one is looking to have its input prices substantially increased as it will be done by steel and aluminum tariffs. [...]
Summers: The route forward toward increased integration may not proceed rapidly and there surely will be hiccups and crises, but the EU will be intact. The whole question of immigration is extremely vexed. If the idea of more European integration is taken to be synonymous with very weak national border controls, it is not likely to be politically acceptable in many countries. In general, the prospect of the EU staying together looks better than it did a year ago. The lack of U.S. leadership raises the pressure on the Europeans to cooperate, and that keeps the union going.
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