HBR IdeaCast Larry Summers: ‘Smart Businesses Are Going to Maintain Flexibility’
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Jul 1, 2025 
Larry Summers, the former U.S. Treasury Secretary and President Emeritus of Harvard University, shares his insights on navigating today's economic landscape. He discusses the potential economic downturn in 2025, the implications of U.S.-China tensions, and how tariffs affect American consumers. Summers emphasizes the importance of flexibility for businesses amid AI advancements, urging leaders to lean on their core strengths. He also reflects on Silicon Valley's ideological shift and the evolving labor market, providing a roadmap for resilience and adaptation.
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Tariffs Harm Competitiveness and Employment
- Tariffs increase prices, raise unemployment, and reduce business competitiveness by raising input costs.
- These policies are a strategic gift to China and unlikely to improve the U.S. trade deficit significantly.
Maintain Flexibility Amid Tariff Uncertainty
- Smart businesses should maintain flexibility with strategies that work in multiple tariff environments.
- Plan for an average U.S. tariff rate settling around 13% to 14% following negotiations.
Recession Risk Below 50%
- Sentiment indicators recently improved while hard economic data remained stable.
- This divergence suggests a less than 50-50 chance of a recession in 2025 unless new dramatic events arise.