Yellen warns sweeping tariffs would ignite inflation

Treasury Secretary Janet Yellen warned in a speech Thursday that the economic policies being proposed by former President Donald Trump would fuel inflation and harm businesses, raising alarm about the risks of blanket tariffs.

The critique, which was delivered in remarks to the Council on Foreign Relations, comes less than a month before the presidential election. Trump and Vice President Kamala Harris have outlined starkly different views about how they see America’s role in the global economy. Although Yellen did not mention Trump by name, she argued that the broad tariffs the former president and some Republicans in Congress support would damage the U.S. economy.

“Calls for walling America off with high tariffs on friends and competitors alike or by treating even our closest allies as transactional partners are deeply misguided,” Yellen said. “Sweeping, untargeted tariffs would raise prices for American families and make our businesses less competitive.”

Trump imposed tariffs on hundreds of billions of dollars of foreign products during his presidency, but his plans if he is reelected would dwarf those moves. On previous occasions, Trump suggested imposing tariffs of 10% to 20% on most foreign items, as well as a tariff of 60% or more on goods from China, in addition to other levies.

This week, Trump suggested he might impose across-the-board tariffs of as much as 50% to force foreign companies to produce in the United States to avoid the levies.

“The most beautiful word in the dictionary is tariff,” Trump said, adding, “It’s my favorite word.”

The Harris campaign has offered few details about Harris’ trade policies, but the vice president has argued that Trump’s tariffs are excessive and that they would raise costs on most Americans.

Still, the Biden administration has kept Trump’s tariffs on China in place and has added new ones to the mix.

The Treasury secretary rarely mentions Trump publicly, but she engaged with him while he was president in her former role as Federal Reserve chair. Trump decided not to appoint Yellen to another term in the job, instead choosing Jerome Powell.

Yellen has been a longtime skeptic of tariffs. She has described them as “taxes on consumers” and has argued that some of the tariffs Trump imposed on Chinese imports should be reversed.

Those arguments went unheeded during debates among White House economists and officials in the Office of the U.S. Trade Representative. In May, the Biden administration announced a sharp increase in tariffs on an array of Chinese imports, including electric vehicles, solar cells, semiconductors and advanced batteries. He also endorsed maintaining tariffs on more than $300 billion worth of Chinese goods that were put in place by Trump.

Yellen has said the new tariffs were justified because they were “targeted” and necessary to protect the green energy technology industries that the Biden administration has been trying to develop with subsidies from the Inflation Reduction Act of 2022. She has argued that China’s excess industrial capacity threatens these sectors, and on Thursday she accused China of engaging in “unfair trade practices”

“Trade and investment with China can bring significant gains to American firms and workers and must be maintained,” Yellen said Thursday. “But we must also have a healthy economic relationship based on a level playing field.”

Although Yellen generally avoids wading into politics, it is evident that she is concerned that a second Trump administration would jeopardize the work she has done to strengthen economic ties with U.S. allies. A hallmark of Yellen’s tenure at the Treasury has been a policy that she called “friend shoring,” which entailed making supply chains less reliant on adversarial countries such as China and Russia and more dependent on economies such as those in Europe.

Trump has threatened to upend that approach with blanket tariffs on imports. During an interview at the Economic Club of Chicago this week, Trump complained about the U.S. trade deficit with the European Union and said nations traditionally considered to be friendly had been mistreating America.

“Our allies have taken advantage of us more so than our enemies,” Trump said.

But on Thursday, Yellen made the case that the United States would struggle to address challenges such China’s trade practices or Russia’s disruption of global energy markets without allies like Europe.

“We cannot even hope to advance our economic and security interests — such as opposing Russia’s illegal invasion of Ukraine — if we go it alone,” Yellen said.

This article originally appeared in The New York Times.

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