Ex-Obama advisor Larry Summers says any US-China deal will not be the 'right one'

Key Points
  • Former Obama advisor Larry Summers isn't hopeful about a trade deal between the U.S. and China.
  • "I don't think the deal is likely to be the right one," Summers says.
  • "There's a lot of focus on the cosmetics of the bilateral deficit," he says.
I expect growth to slow: Summers

If there is ultimately a trade agreement between the U.S. and China, it probably won't be the one that is needed, Larry Summers, former economic advisor to President Barack Obama, told CNBC on Tuesday.

"I don't think the deal is likely to be the right one," he said on "Closing Bell."

"There's a lot of focus on the cosmetics of the bilateral deficit," added Summers, who also was Treasury secretary during Bill Clinton's presidency.

"Instead of trying to mobilize the world together to work to address China's many problems, we're launching trade attacks on virtually every part of the world and therefore in a sense strengthening China's position," Summers said.

Trade tensions are once again escalating between the two nations.

President Donald Trump tweeted on Sunday that he would ratchet up tariffs to 25% on $200 billion worth of Chinese goods starting at 12:01 a.m. ET Friday because China pulled back on trade promises.

However, Treasury Secretary Steven Mnuchin said the U.S. would reconsider the duties if trade talks get back on track. Chinese Vice Premier Liu He is expected to join a delegation in the United States this week.

Fears of an all-out trade war are hitting the stock market. The Dow Jones Industrial Average closed down 473.39 points on Tuesday, after plunging 648.77 points earlier in the session. It was the blue-chip index's biggest drop since Jan. 3.

"We see this each time the president moves in ways that seem designed to disrupt the negotiations," Summers said of the market's moves.

What's more, while the tariffs aren't likely to cause a "sudden slowdown," they are "gradually corrosive" to the economy, he said.

In the end, he expects the economy to start to slow down from here.

"The risks of recession sometime in the next few years remain substantial," he said. "My sense is it is still right to be quite cautious."

— CNBC's Jacob Pramuk and Kayla Tausche contributed to this report.