Janet Yellen, the former Treasury Secretary, has expressed concerns regarding the economic implications of President Donald Trump’s tariffs, suggesting they are likely to lead to an increase in consumer prices and a decline in average household incomes. This prediction comes at a time when the U.S. inflation rate has shown signs of a gradual decrease.
During an appearance on Finance Newso’s “Money Movers” on Thursday, Yellen stated, “I would expect inflation, on a year-over-year basis of this year, to shoot up to at least 3%, or slightly over, because of the tariffs.”
Despite acknowledging the unpredictability surrounding the implementation of Trump’s tariffs, she emphasized their potential effect on pricing. “I definitely expect that we’re going to see them impact pricing,” Yellen noted.
Yellen further explained that these tariffs are expected to result in a decrease in average household income, predicting a reduction of about $1,000 per household due to the tariffs and their secondary effects. “It could be greater than that, depending on how things play out with the tariff program,” she warned.
Her statements come amidst recent reports from the U.S. Bureau of Labor Statistics indicating that inflation has been rising at a slower pace than anticipated in recent months.
President Trump has leveraged this data to intensify criticisms against Federal Reserve Chair Jerome Powell, even labeling him a “numbskull” at a White House event later that day.
Supporters of Trump have contested the notion that tariffs contribute to inflation. However, Yellen, who previously led the Federal Reserve from 2014 to 2018, advised that the Fed should currently be cautious of potential second-round effects, including wage increases and rising inflation expectations affecting ongoing inflation trends.
“The Fed does not have a good handle on how the tariffs are going to affect either spending in the labor market or inflation,” Yellen articulated, suggesting that the central bank may persist in its cautious stance for now.
