Yellen Criticizes Global Tariff Idea, Defends Section 301 Tariff Policy

"Calls for walling off America with high tariffs on friends and competitors alike, or by treating even our closest allies as transactional partners, are deeply misguided," she said in remarks prepared for a speech at the Council on Foreign Relations. "And 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."

Yellen said high tariffs will raise the cost of goods we import, as well as the prices domestic firms charge for the goods they produce in the U.S. Tariffs also would hit "intermediate goods that are critical to domestic firms producing in the United States that will make them less competitive."

Tariffs would also make it more expensive for families on goods we don't produce in meaningful quantities, such as toys, she said, and would cause inflation. "And so I think these are a very bad idea," she said.

But Yellen defended the Biden administration's decision to retain all the Section 301 tariffs on Chinese imports imposed under Trump.

"It is true that President Trump put in place significant tariffs against a pretty wide range of imports from China, and the Biden administration didn't get rid of them, and I think the main reason for that is that we look to China to address the practices that were emphasized in the 301 action, which went to issues of unfair competition." She said President Joe Biden felt China should not be rewarded by lowering the tariffs, given its inaction.

"So we have put in place some additional tariffs, but it's on a narrow range of goods where we've decided that we want the United States consciously in sectors like semiconductors, renewables, clean energy, electric vehicles, where we really think it's important for the United States to have some production capacity, partly for supply chain resilience that we don't want to be completely dependent on China, and partly because these are dynamic sectors, where, over time, production leads to technological changes that reduce costs."

She noted that the surge in exports of electric vehicles from China has led to trade remedies around the globe. "The European Union and emerging market countries have also taken or are exploring actions. I’ve raised concerns about overcapacity frequently and directly with my Chinese counterparts, including on multiple trips to China, and with America’s allies and partners, who share these concerns and are also responding. This growing international consensus is a powerful indication to China that it must shift its practices."

Yellen also spoke about the benefits of trade in an administration that often sounds skeptical. "Trade and investment with China can bring significant gains to American firms and workers and must be maintained," she said. "But we must also have a healthy economic relationship based on a level playing field."

She said that the Biden-Harris administration focused from the start on stabilizing international economic relationships, and said the administration believes the American economy cannot be strong if the rest of the global economy is stagnating.

"American businesses and families have a tremendous amount to gain from our connections to the global economy and from U.S. global economic leadership," she said.