About this Video

• Video Title: ‘The worst self-inflicted wound’: Former treasury secretary blasts Trump’s trade war
• Channel: CNN
• Speakers: Janet Yellen
• Duration: 00:18:08

Introduction

This CNN interview features former U.S. Treasury Secretary Janet Yellen discussing the economic consequences of President Trump's trade policies. Yellen strongly criticizes the trade war, highlighting its negative impact on the U.S. and global economies.

Key Takeaways

• Trump's trade policies caused significant damage: Yellen agrees with assessments that Trump's trade policies inflicted profound harm on the world economy, even after backtracking. She cites high average tariff rates (20-25%), costing typical American households an estimated $4000 annually.
• Loss of investor confidence: Foreign investors lost faith in the credibility of U.S. policy due to unpredictability. This is evidenced by the unexpected rise in U.S. Treasury bond yields during a time of crisis, which typically see a decline as investors seek safe havens. This lack of confidence could lead to financial instability.
• Concerns about Federal Reserve appointments: Yellen expresses concern about potential future appointments to the Federal Reserve under a potential Trump administration, fearing that non-mainstream appointees could jeopardize the Fed's independence and predictability.
• Strong criticism of Trump's economic handling: Yellen gives a failing grade to the Trump administration's economic management, describing its policies as the "worst self-inflicted wound" she's ever seen. She cites tariffs, cuts in government services, and expanding deficits as particularly damaging.
• Increased recession likelihood: The combination of tariffs, uncertainty, and decreased investment and consumer spending significantly increases the probability of a U.S. recession, according to Yellen.

1. Yellen contrasts the strong, resilient U.S. economy she left behind with the current situation. While acknowledging inflationary pressures previously existed, she highlights the current rising bond yields, the S&P and Dow in correction territory, companies refusing to issue guidance for the year, and predictions of a 60% (JP Morgan) and 45% (Goldman Sachs) chance of a recession as indicators of a significant economic downturn.

2. Yellen explains that during times of economic uncertainty, investors typically flock to safe haven assets like U.S. Treasuries, causing bond yields to decline. The fact that yields rose instead indicates a loss of investor confidence in the stability and predictability of U.S. economic policy. The consequences of this include downward pressure on the dollar and bond prices, potentially triggering more financial instability as highly leveraged hedge funds begin selling their U.S. Treasury holdings.