Yellen warns sweeping tariffs will fuel inflation

Treasury Secretary Janet L. Yellen plans to warn in a speech Thursday that former President Donald J. Trump's proposed economic policies would fuel inflation and hurt businesses, raising concerns about the risk of blanket tariffs.

The criticism, which will be delivered in comments to the Council on Foreign Relations, comes less than a month before the presidential election. Mr. Trump and Vice President Kamala Harris have expressed stark differences in how they view America's role in the global economy. While Ms. Yellen is not expected to mention Mr. Trump by name, she will argue that the sweeping tariffs backed by the former president and some Republicans in Congress would hurt the U.S. economy.

“Miss Yellen plans to say in her speech, which was obtained by The New York Times, to call for deep misdirection by walling off America with high tariffs on friends and competitors alike, or treating even our closest allies as trading partners.” “Clear, untargeted tariffs will raise prices for American families and make our businesses less competitive.”

Mr Trump imposed tariffs on hundreds of billions of dollars worth of foreign goods during his presidency, but his plans would dwarf those measures if he is re-elected. On previous occasions, Mr. Trump has suggested tariffs of 10 to 20 percent on most foreign items, as well as tariffs of 60 percent or more on goods from China, among other tariffs.

This week, Mr. Trump suggested he could impose across-the-board tariffs of as much as 50 percent to force foreign companies to manufacture in the United States to avoid tariffs.

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

The Harris campaign has provided few details about Ms. Harris's trade policy, but the vice president has argued that Mr. Trump's tariffs are excessive and will increase costs on most Americans.

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

The Treasury secretary rarely mentions Mr. Trump in public, but he has been involved with him during his presidency in his former role as Federal Reserve chair. Mr. Trump chose not to appoint Ms. Yellen to another term in the job, instead appointing Jerome H. Chose Powell.

Ms. Yellen has long been skeptical of tariffs. He described them as “taxes on consumers” and argued that some of the tariffs Mr Trump had imposed on Chinese imports should be withdrawn.

These arguments fell on deaf ears during the debate between White House economists and officials at the Office of the United States Trade Representative. In May, the Biden administration Announce a sharp increase in tariffs on an array of Chinese imports, including electric vehicles, solar cells, semiconductors and advanced batteries. He supported maintaining tariffs on more than $300 billion worth of Chinese goods imposed by Mr. Trump.

Ms. Yellen said the new tariffs were justified because they were “targeted” and necessary to protect green energy technology industries that the Biden administration is trying to develop with subsidies from the 2022 Inflation Reduction Act. He has argued that China's overcapacity threatens these sectors, and on Thursday he plans to accuse China of engaging in “unfair trade practices”.

“Trade and investment with China can and must continue to bring significant benefits to American companies and workers,” Ms. Yellen was scheduled to say Thursday. “But we must have a healthy economic relationship based on a level playing field.”

Although Ms. Yellen usually avoids getting into politics, it is clear that she is concerned that a second Trump administration will jeopardize the work she has done to strengthen economic ties with US allies. A hallmark of Ms. Yellen's tenure at the Treasury is a policy she calls “buddy shoring,” making supply chains less dependent on rival countries like China and Russia and more dependent on economies like Europe.

Mr Trump has threatened to continue that approach with blanket tariffs on imports. During an interview at the Economic Club of Chicago this week, Mr. Trump complained about the U.S. trade deficit with the European Union and said countries traditionally considered friendly were treating America poorly.

“Our allies have taken advantage of our enemies,” Mr Trump said.

But on Thursday, Ms. Yellen planned to make the case that the United States would struggle to deal with challenges such as 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 aggression in Ukraine – if we go it alone,” Ms Yellen is expected to say.