Larry Summers warns of a 'downward spiral' if Trump-style nationalism takes hold globally

Populist policies promised by U.S. President-elect Donald Trump may boost the American economy in the short run, but they pose a danger down the road, former Clinton Treasury Secretary Larry Summers told CNBC on Wednesday.

Appearing on "Squawk Box" from the World Economic Forum in Davos, Switzerland, Summers said "there's a lot anxiety here" about what's happening politically in many parts of the industrialized world, including Brexit, upcoming elections in Europe and the Trump effect in the United States.

"If it's not put to rest ... populist policies we're pursuing will only have very short-run benefits," Summers said. "Ultimately, there will be more uncertainty, reductions in confidence and a bit of a downward spiral."

Larry Summers at the World Economic Forum in Davos, Switzerland.
David A. Grogan | CNBC
Larry Summers at the World Economic Forum in Davos, Switzerland.

Summers, a former Obama economic advisor, did admit that "animal spirits," emotional feelings of optimism, have been "running high" since Trump won the presidency.

There's a sense of new energy in business. Some of that is a welcome corrective to what probably was some feeling that it had become a bit overly punitive in some sectors," Summers acknowledged.

"[But] there's also a deep concern about populist policy, particularly populist nationalist policy that lurks into protection. And that's a very real risk hanging over the global economy," he warned.

Sign Up for Our Newsletter Morning Squawk

CNBC's before the bell news roundup
Get this delivered to your inbox, and more info about about our products and services.
By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.