Janet Yellen, the former US Treasury Secretary, has strongly condemned former President Donald Trump’s tariffs, claiming that they have harmed the US economy and may threaten the country’s long-term financial image. In her recent public remarks, Yellen has staunchly emphasized the persistent negative consequences of Trump’s trade policies, which she claims “the worst self-inflicted policy wound inflicted on our economy” and have reduced worldwide trust in the U.S. and hindered efforts to stabilize foreign markets.

The Economic Fallout of Trump’s Tariffs

According to Bloomberg, Yellen has questioned the efficiency of President Donald Trump’s tariff measures, calling them “unclear and illogical” and stating that China would be inclined to “de-escalate the trade conflict.” Trump’s tariffs are part of a bigger trade conflict with China, which has already strained economic relations. Yellen’s comments emphasize broader economic concerns, emphasizing the significance of closely monitoring consumer confidence and overall market conditions.

Tariffs have largely raised consumer prices, mainly in import-reliant sectors, and triggered financial market instability, primarily currency swings in the US. Reuters reported that Yellen said the tariffs, which primarily focused on Chinese products, had strained relations with global trading partners and also disrupted supply chains, contributing to higher inflation and reduced competitiveness for US companies. 

Yellen has also expressed concern about the impact of Trump’s tariff policy, which she termed costly for the American people. She predicted that tariffs would cost households an average of $4,000 each year. She said, “The rationale behind Trump’s tariff policy is unclear and entirely nonsensical. The practice of removing tariffs and reducing tariffs is positive, but we are in a world full of enormous uncertainty.” 

Furthermore, in an interview with CNN’s Anderson Cooper, she stated:

“This is the worst self-inflicted policy wound I’ve ever seen in my career inflicted on our economy. The Trump tariff plans are doing immense damage to our economy. You can see that in the stock market, the impact of these tariffs is expected to have on American households.”

Loss of Confidence in the U.S. Dollar 

Yellen also cautioned that the tariffs affected the position of the US dollar as the world’s reserve currency. Additionally, tariffs  have undermined confidence in dollar-denominated assets, with a possible opening for other nations to leave behind their dependence on the US dollar in trade arrangements. She acknowledged that such uncertainty might have far-reaching effects for the global economy.

During a CNBC interview appearance, Yellen noted:

The safety of bedrock financial assets is really very worrisome. Normally, when times are chaotic and uncertainty is high, there’s a desire to invest in safe assets, and that tends to push down U.S. Treasury yields, but U.S. Treasury yields went up. When U.S. Treasury yields go up, normally, that attracts capital inflows that would boost the dollar, but both the dollar declined and U.S. Treasury yields rose. What that suggests is that investors are beginning to shun dollar-based assets and calling into question the safety of what is the bedrock of the global financial system, namely U.S. Treasury.”

Conclusion

Yellen’s case highlights the necessity of rethinking economic policies rooted in tariffs and isolationism.  With the United States encountering trade barriers and economic recovery challenges, she urges a more cooperative approach to international trade, to reboot American economic diplomacy. 

With the status of the US dollar as the world reserve currency under attack, and also changing trade relations, Yellen’s warnings could affect future policies that ensure the US economy continues to lead in an interdependent world.