Yellen hopes China doesn’t mount ‘significant’ trade retaliation

Treasury Secretary Janet Yellen said she hopes China won’t mount major retaliation against any steps Washington takes to safeguard its investments in critical new industries.

While Yellen declined to confirm that the Biden administration is poised to unveil sweeping new tariffs on Chinese goods including electric vehicles, batteries and solar cells, she said in an interview Monday that any measures “should be targeted to our concerns and not broad-based.”

“Hopefully we will not see a significant Chinese response — but that’s always a possibility,” she said. 

Biden is expected this week to quadruple tariffs on Chinese EVs and sharply increase levies for other key industries. The moves are designed to safeguard the effectiveness of investments that his legislation is making in those same sectors in the US.

“The president wants to make sure that he protects these investments,” Yellen said. “He believes it unacceptable — as I do — to be completely dependent on China in these areas,” given that Beijing engages in massive subsidies and “is really not playing by the rules.”

Inflation Priority

Yellen was speaking in Stafford County, Virginia, on her latest domestic visit to showcase investments enabled by President Joe Biden’s policies. She’s set to tour a high-speed internet installation site, part of an initiative to boost broadband connections for rural communities.

Biden has struggled to gain public traction on economic achievements, despite GDP growth that’s surpassed expectations and historically strong job and wage gains. The US unemployment rate has held below 4% for more than two years, the longest such stretch since the 1960s.

Inflation continues to weigh on voters’ concerns as the November presidential election looms. Consumer confidence last month hit the lowest level since mid-2022, weighed down by concerns about elevated food and gas costs.

Yellen reiterated that reining in the cost of living is a top priority for Biden, and highlighted how prescription-drugs measures and other steps the administration has taken have helped to hold down inflation.

The latest reading on consumer prices is due Wednesday, with economists anticipating a moderation in increases for April. The annual rate of gains is projected at 3.6%, the smallest in three years but still likely too fast to placate Federal Reserve policymakers, who want evidence inflation is slowing consistently as they debate the timing of interest-rate cuts.

Yellen has said inflation should be damped later this year by an easing in housing costs.