As a former Federal Reserve Chair and U.S. Treasury secretary, Janet Yellen isn’t new to economic management.
So when she told CNN that the current administration’s approach is a prime example of economic mismanagement, it carried some weight.
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Yellen specifically singled out President Donald Trump’s trade war and tariff policy as financially destructive. “This is the worst self-inflicted wound that I have ever seen an administration impose on a well-functioning economy,” the economist said in an April interview, warning that other policies being considered by the administration could potentially deepen these wounds further.
Here’s why Yellen is so alarmed by the ongoing trade conflict and why she believes her successor, Scott Bessent, holds the key to salvaging the global economy.
Huge financial shock
As of mid-April, many global tariffs announced on Trump’s so-called “Liberation Day” are on a 90-day pause, according to Bloomberg’s live tariff tracker.
However, this policy is constantly shifting and Yellen points out that some of the nation’s largest trading partners — China, Mexico and Canada — face varying degrees of tariffs despite the pause.
Chinese exports, for instance, currently face a 145% tariff, while Mexico and Canada face between 10% to 25% tariffs on goods that do not comply with the U.S.-Mexico-Canada Agreement (USMCA) trade deal.
“Economists calculate that at this point, average tariff levels are now in the 20% to 25% range,” Yellen told CNN. “At the beginning of the Trump administration, they were just over 2%. So even if the reciprocal tariffs are abandoned, we have the highest average tariff rate since 1934.”
For the average family, this ongoing trade war is likely to raise costs. A typical household could see roughly $4,700 in additional annual expenses based on the current tariff rate, according to The Budget Lab at Yale.
The lack of visibility on what this trade war could look like in just a few weeks or months is making matters worse, says Yellen. To bolster confidence, she calls on Bessent to communicate with the general public more clearly.
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Bolstering credibility
According to Yellen, consumers, investors and corporations are struggling to adjust to the new reality because the tariff policy is “incoherent.” This is undermining the administration’s credibility.
She calls on Bessent and senior economic officials at the White House to do a better job communicating the trade policy not just with the general public, but also with Trump himself.
“All of them should be explaining to the president why his policies are so damaging to the American economy and why they will harm American workers and households, as well as people around the world,” Yellen said.
“And they should make sure that the president understands this reasoning, understands what impact it has been having on markets and why it’s so dangerous.”
Clarity and stability on economic policies may not reduce the costs of the ongoing trade war, but could make it easier for consumers and businesses to prepare for the impact.
For now, most families and businesses need to brace for higher costs, higher volatility and, potentially, lower income in the near-future.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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