President-elect Donald Trump’s stunning remark Tuesday that the U.S. dollar is too strong was “unusual” and “leaves the market confused,” former Clinton Treasury Secretary Larry Summers told CNBC on Wednesday.
Summers said Trump is pursuing policies — such as a proposed border tax for companies and other fiscal policy changes — that would boost the currency.
“The rise of the dollar is a predictable consequence,” Summers told at the World Economic Forum in Davos, Switzerland.
The argument for weakening the dollar is that a strong greenback runs against plans to rescue American’s manufacturing base; a strong dollar makes U.S. exports more expensive for folks overseas to buy.
A better way to prevent the “artificial overvaluation” of the dollar that threatens U.S. manufacturing is to “back off the border tax and protectionism and the demonization of Mexico,” Summers said in an interview on “Squawk Box.”
Summers that presidential administrations taking a shot at the dollar is uncommon and has been “regretted in the past.” One well-known example: In 1993, then-Treasury Secretary Lloyd Bentsen jolted the market when he called for a strong yen, sending the dollar crashing.
But some experts said Trump’s remarks on the dollar were extreme for an incoming president. “This is the first time we have a president-elect say the dollar has gone too far. He’s saying things and doing things that no president has ever done before, Marc Chandler, chief foreign exchange strategist, Brown Brothers Harriman, told CNBC on Tuesday.
The ICE US Dollar index on Tuesday closed at its lowest level since Dec. 7. Trump’s comments were first reported in The Wall Street Journal.