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US Treasury Secretary Janet Yellen warned the incoming Donald Trump administration against imposing broad tariffs, saying they would lead to higher inflation.
Donald TrumpTrump, who is scheduled to take office next month, has threatened to impose heavy tariffs on Canada, Mexico and China, which are important trading partners of the United States.
Yellen said that while there is some value in these types of sanctions to address “unfair trade practices,” imposing broad measures could have a “negative impact on the competitiveness of some sectors of the global economy.” American economy “It could significantly increase costs for families.”
Price pressures may be severe enough to “derail” progress in lowering inflation after it rose in 2022 to the highest level in four decades due to a combination of slowing supply and pent-up demand.
Trump also hinted that he should have a greater say in monetary policy, a move that would upend decades of Fed independence.
“I think it's a mistake to engage in commentary on the Fed and certainly to take steps to compromise its independence,” Yellen, who previously ran the central bank, said at an event hosted by The Wall Street Journal on Tuesday. “I think this tends to undermine the confidence of the financial markets and, ultimately, the confidence of Americans in an important institution.”
While Trump doubled down on Use definitions As a tool for negotiation Relaxed His position on the Federal Reserve. In an interview Sunday with NBC News Learn about journalismHe said he would not seek to remove President Jay Powell before his term ends in May 2026.
Trump had only limited legal recourse to do so anyway, but the threat itself sowed fears that the Fed could face a major challenge over the next four years. Powell has responded to these concerns, saying earlier this month that his foundation is protected by “the law of the land.”
Yellen also said she remains concerned about the country's “fiscal sustainability”, in light of the sharp rise in US sovereign debt.
“I'm sorry we haven't made more progress,” she said. I believe that the deficit must be reduced, especially since we are now in an environment characterized by high interest rates.
In a sign of these concerns, bond giant Pimco said this week that the matter has become more so hesitant To buy long-term US government debt given “sustainability issues” and the possibility of higher inflation under Trump.
