WASHINGTON, (Reuters) – U.S. Treasury Secretary Janet Yellen said yesterday she was worried that President-elect Donald Trump’s plans to levy broad import tariffs could derail progress in quelling inflation and raise costs for households and businesses.
Yellen, at a Wall Street Journal CEO Council event, also said she was concerned about U.S. fiscal sustainability and said Congress needed to look for ways to pay for any extensions of Trump’s 2017 individual and small-business tax cuts, which are due to expire in 2025.
Trump’s plans to impose new tariffs of 60% on Chinese imports and 10% to 20% on goods from elsewhere would “raise prices significantly for American consumers and create costs pressures” on companies,” Yellen said.
“So it would have an adverse impact on the competitiveness of some sectors of the United States economy and could significantly raise costs to households,” Yellen added. “So this is a strategy I worry could derail the progress that we’ve made on inflation and have adverse consequences on growth.”
Regarding the U.S. fiscal picture, Yellen said that extension of all expiring provisions of the 2017 Tax Cuts and Jobs Act would add $5 trillion to U.S. deficits over 10 years, and that Congress needed to find offsets to avoid an “explosion” of debt.
The Biden administration turned in a $1.83 trillion budget deficit for the 2024 fiscal year ended Sept. 30, the largest outside of the COVID-19 era, as debt interest costs topped $1 trillion for the first time.
“I am concerned about fiscal sustainability, and I am sorry that we haven’t made more progress,” Yellen said. “I believe that the deficit needs to be brought down, especially now that we’re in an environment of higher interest rates.”
Yellen said she had a conversation with Trump’s choice for secretary, hedge fund manager Scott Bessent, and discussed the Treasury’s broad responsibilities, including for economic and tax policy, and international alliances.
She said she told him “what he would find at Treasury is a staff, and particularly civil servants, who are analytical, proficient, professional, operate with high integrity and produce analysis that can be relied on that is important to financial markets and to the economy.”
She said she told Bessent that the department’s analysis and policies related to the $28 trillion U.S. Treasury debt market help the U.S. economy and financial markets function better.
On the Federal Reserve, Yellen said she was a “strong proponent of an independent, and non-partisan, non-political Fed.”
Trump was free to comment on Fed policy, Yellen said, but recent Democratic administrations have refrained from doing so, while at the same time the Fed has become more communicative, providing more forward guidance about its policy logic, which has helped it steer clear of political influence.
“I think it’s a mistake to become involved in commenting on the Fed and certainly taking steps to compromise its independence,” she said. “I believe it tends to undermine the confidence of the financial markets and ultimately of Americans in an important institution.”
