FX.co ★ Yellen urges Trump to rethink tariff strategy amid financial stability risks

US President Donald Trump is inflicting harm on his own economy by launching a tariff war, according to US Treasury Secretary Janet Yellen. She believes his strategy is self-destructive. Yellen noted that Trump’s recent decision to pause the implementation of sweeping retaliatory tariffs was partially influenced by rising tensions in the US Treasury bond market and this may just be the beginning.

Previously, Yellen warned that the recent surge in yields and selling pressure from highly leveraged hedge funds holding Treasury securities posed a serious risk to US financial stability. Janet Yellen cautioned that a sharp rise in yields could lead to financial instability if it prompted a widespread sell-off of US Treasuries. She added that this concern was among the reasons why President Trump had chosen to delay the implementation of new tariffs.

Yellen, who led the Treasury under President Joe Biden, also criticized Trump’s economic strategy, calling it “the worst self-inflicted wound…an administration imposes on a well-functioning economy.”

Her comments come one year after a major speech in Beijing, where she warned that an economic conflict between the US and China would be catastrophic for both nations. As President Trump now moves to impose tariffs exceeding 120% on Chinese goods, with China responding in kind, Yellen’s earlier warnings appear more relevant than ever.