(Bloomberg) --
US Treasury Secretary Janet Yellen warned that sweeping, untargeted tariffs would hurt American households and businesses and preclude the US from advancing its economic and security interests.
“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 in remarks to the Council on Foreign Relations in New York Thursday.
Her comments, less than three weeks from the presidential election, come against a backdrop of Republican candidate Donald Trump touting tariff hikes as his preferred economic policy tool. He’s pledged to impose them against both traditional American allies as well as foes.
The former president called tariffs “the most beautiful word in the dictionary” during an interview with Bloomberg earlier this week, launching into a broad defense of his protectionist policies, while he complained that the US is being taken advantage of by nations as varied as China, Mexico and France.
If they win the White House, Republicans have floated a 10% across-the-board tariff on imports. Trump says such a universal levy will raise billions of dollars in revenue — helping to pay for things including more tax cuts. Mainstream economists say Trump’s trade agenda, which has also featured calls for duties on Chinese-made goods of 60% or more, would essentially amount to a tax increase for US households.
Yellen echoed such warnings, arguing that “sweeping, untargeted tariffs would raise prices for American families and make our businesses less competitive.”
Xi’s Stimulus
“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,” she added.
Yellen also defended the Biden administration’s approach to China, which is geared toward defending and securing national security without trying to hold back its main geopolitical rival economically.
“Trade and investment with China can bring significant gains to American firms and workers and must be maintained,” Yellen said, adding that the two sides “must also have a healthy economic relationship based on a level playing field.”
Asked about the slew of recent moves by President Xi Jinping’s government to shore up China’s economic growth, the US Treasury chief said “we haven’t really seen meaningful figures yet — I think we have to wait to see what this is going to amount to.”
QuickTake: What’s Wrong With China’s Economy? What’s Xi Doing?
China Concerns
More broadly, Yellen reiterated that China’s economy is unusually imbalanced, with a 40% savings rate and a much smaller share of consumer spending than in other countries. While there is broad consensus around the world that Beijing ought to undertake reforms to address that, such as by strengthening the social safety net and boosting households’ share of national income, that’s not the approach Xi has endorsed.
“They need to boost consumer spending, and not by having one-time rebate checks,” she said. “It’s the China macro situation — with the decision to target certain sectors and subsidize investment to the point of global overcapacity — that’s really of concern to us.”
In May, the US increased tariffs on a range of Chinese-made products, and the Treasury chief has been at the forefront of urging US allies also to act on the issue.
On Thursday, she defended such measures, saying that “no matter how much we invest to strengthen our manufacturing at home, we cannot support American businesses and families without also engaging to address these challenges.”
(Updates with comments on China’s economic plans, starting in first paragraph before ‘China Concerns’ subheadline.)
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