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Newsdeck

Yellen Hopes China Doesn’t Mount ‘Significant’ Trade Retaliation

Yellen Hopes China Doesn’t Mount ‘Significant’ Trade Retaliation
United States Secretary of the Treasury, Janet Yellen, addresses a press conference prior to her participation in the G20 ministerial meeting in Sao Paulo, Brazil, 27 February 2024. The meeting runs from 26 to 29 February 2024. EPA-EFE/Isaac Fontana

Treasury Secretary Janet Yellen said she hopes China won’t mount a 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 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.

President Joe 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.

Read More: Biden to Hike Tariffs on China EVs, Offer Solar Exclusions

“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.”

Yellen was speaking in Stafford County, Virginia, on her latest domestic visit to showcase investments enabled by Biden’s policies.

The Treasury chief said China’s yuan is among the currencies that she monitors, along with the euro and yen. Asked about other countries’ interventions in the foreign-exchange market, Yellen continued to register her discomfort with government intervention in currency markets — especially among Group of Seven countries.

Currency Issues

G-7 nations have agreed not to tinker with exchange rates unless they are tamping down extreme volatility, she noted. Japan, a G-7 member, is widely believed to have intervened to bolster the yen two weeks ago, after it tumbled past 160 per dollar for the first time since 1990.

“I’m not going to comment on a situation in a specific country,” Yellen said. “It’s possible for countries to intervene. It doesn’t always work without more fundamental changes in policy, but we believe that it should happen very rarely and be communicated to trade partners if it does.”

Read More: Yen’s Slide Spurs Worry, From Businesses to Bank of Japan

On her visit to Virginia Monday, Yellen is 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.

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.

Questioned about the mounting US debt burden, Yellen suggested Democrats are pursuing the more responsible fiscal policy. Former Republican President Donald Trump recently pledged across-the-board tax cuts for American households and businesses.

Yellen cited a Congressional Budget Office report estimating that extending all of the tax cuts enacted under Trump in 2017 would cost $5 trillion over the next decade. By contrast, Biden wants to extend tax breaks only for those making less than $400,000 a year, while raising taxes on companies and high earners.

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  • Steve Davidson says:

    Good for America. Unfortunately, Xi has screwed up very badly on the Chinese people’s chances of finally getting shot of the commies’ dictatorship (and being free after centuries of autocratic rule) and deserves to be shown up for what he is. The New Mao. Let him stew in his own juice.

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