Yellen: "Trump's Fed Interference Will Be a Mistake"... Also Criticizes High Tariffs

Janet Yellen, former Chair of the U.S. Federal Reserve (Fed) and current Treasury Secretary, warned that it would be a "mistake" for President-elect Donald Trump, who will take office in January next year, to comment on the Fed, saying it would "undermine its independence." She also pointed out that the so-called 'Trump tariffs' would hinder progress on U.S. inflation and lead to slower growth.

Reuters Yonhap News

On the 10th (local time), Secretary Yellen attended an event hosted by the Wall Street Journal (WSJ) and stated, "Research findings and my experience show that when a central bank can make the best judgments free from political influence, the country performs better," adding, "This results in stronger outcomes not only in price stability but also in job creation and economic growth."

This was a criticism following President-elect Trump's earlier remarks expressing a desire for at least some say in the Fed's monetary policy, which raised concerns about the political independence of the central bank. Secretary Yellen pointed out that presidential involvement "could undermine confidence in financial markets and ultimately the trust Americans have in major institutions." Regarding the possibility of the Fed Chair being dismissed by the president, she responded that she understands the Chair can only be removed by the Senate for cause.

Current Fed Chair Jerome Powell succeeded Yellen and took office as Fed Chair in 2017 during Trump's first term, with his term running until May 2026. However, President-elect Trump recently dismissed the possibility of Powell's early dismissal in an interview with NBC News.

On the same day, Secretary Yellen also criticized the high tariffs that President-elect Trump has promised. Trump, who has called himself the 'Tariff Man,' has openly stated that he will impose universal tariffs of up to 20% and high tariffs of 60% on Chinese products immediately after taking office.

In response, Secretary Yellen expressed concern, saying, "This will cause significant price increases for American consumers and cost pressures for businesses," adding, "It will weaken competitiveness in some sectors of the U.S. economy and increase the burden on households." She further noted, "I am worried that it could hinder the progress we have made on inflation and have negative effects on economic growth."

This aligns with U.S. President Joe Biden's speech on the same day, in which he said, "High universal tariffs would be a serious mistake." However, Secretary Yellen has actively supported President Biden's approach of imposing targeted tariffs on Chinese products.

Secretary Yellen also expressed concern about the U.S. fiscal deficit remaining high amid the current high interest rate environment. She mentioned that if President-elect Trump extends the 2017 tax cuts, which are set to expire next year, the U.S. fiscal deficit could increase by more than $5 trillion over the next decade, emphasizing the need for congressional action to prevent a debt explosion. Additionally, she confirmed that she had a phone conversation before Thanksgiving with Scott Bessent, billionaire CEO of Key Square Group, who has been nominated as Treasury Secretary for Trump's second term administration.