Allianz Chief Economic Advisor Mohamed El-Erian warned that while President Donald Trump‘s evolving tariff strategy may deliver immediate gains, it risks longer-term economic damage through stagflation and eroded U.S. global influence.
What Happened: El-Erian explained on X that the Trump administration’s tariff strategy follows a three-pronged approach, as highlighted in a Bloomberg Opinion piece Tuesday: broad duties for revenue and trade balance, targeted protection for industries like steel and aluminum, and strategic tariff threats for political leverage.
“America’s many structural advantages and its bigger and cyclically stronger economy give it the upper hand in most negotiations,” El-Erian wrote, citing recent success in trade disputes with Colombia. However, he cautioned that “uncertainty is a feature rather than a bug” in the current approach.
The warning comes as Trump pledged to impose 25% tariffs on metal imports without exemptions, sending U.S. steel stocks like Cleveland-Cliffs Inc. CLF and Nucor Corp. NUE soaring on Monday.
Why It Matters: Former Treasury Secretary Larry Summers echoed these concerns, stating on social media that the proposed tariffs would lead to “fewer American jobs, more American inflation, and probably a bigger trade deficit.”
El-Erian highlighted particular risks for low-income consumers and companies still recovering from post-pandemic inflation. He argued that frequent use of tariffs could make America “a less reliable partner,” potentially reducing bilateral trade interactions.
“Trade is an intrinsically cooperative game,” El-Erian noted. “Playing it uncooperatively can benefit the more powerful party in the short term… But the longer that international trade is played as an uncooperative game, the bigger the welfare losses to everyone participating, including the U.S.”
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